Gas Statement of Opportunities

Gas Statement of Opportunities
November 2015
Disclaimer
The Independent Market Operator (IMO) has prepared this Gas Statement of Opportunities report under Part 6 of the Gas Services
Information Rules. In preparing this publication the IMO has used all reasonable endeavours to include the best information
available to it at the time. Demand, supply and price forecasts herein are prepared using confidential data from pipeline companies,
Gas Bulletin Board data, confidential estimates and publicly available input data as at 27 November 2015.
The purpose of this publication is to provide an overview, technical and market data and additional information regarding the
status and opportunities in the natural gas market in Western Australia 1. Information in this publication does not amount to a
recommendation in respect of any possible investment and does not purport to contain all of the information that a prospective
investor, participant or potential participant in the Western Australian gas market may require.
The information contained in this publication may not be appropriate for all persons and it is not possible for the IMO to have
regard to:
investment objectives;
financial situation; and
particular circumstances of those who make use of this publication.
While all due care has been taken in the preparation of this document, the information contained in this publication may contain
errors or omissions. It is inevitable that actual outcomes will differ from the forecasts presented in this document.
In all cases, anyone proposing to rely on or use the information in this publication should obtain independent and specific advice
from appropriate experts and form their own view prior to:
entering into or altering a new or existing agreement;

entering into or altering a new or existing financial transaction; or
entering into or altering a new or existing corporate structure.
Accordingly, to the maximum extent permitted by law, neither the IMO, the IMOs employees, nor any of the IMOs advisers,
consultants or other contributors to this publication (or their respective associated companies, businesses, partners, directors,
officers or employees):
a)
make any representation or warranty, express or implied, as to the currency, accuracy, reliability or completeness of this
publication and the information contained in it; or
b)
shall have any liability (whether arising from negligence, negligent misstatement, or otherwise) for any statements, opinions,
information or matter (expressed or implied) arising out of, contained in or derived from, or for any omissions from, the
information in this publication, or in respect of a persons use of the information (including any reliance on its currency,
accuracy, reliability or completeness) contained in this publication.
Copyright notice
The IMO is the owner of the copyright and all other intellectual property rights in this publication. All rights are reserved. This
publication must not be re-sold without the IMOs prior written permission. All materials are subject to copyright under the
Copyright Act 1968 (Commonwealth) and permission to copy it, or any part of it must be obtained in writing from the IMO.
Independent Market Operator

Level 17, 197 St Georges Terrace
Perth WA 6000
Postal Address:
PO Box 7096,
Cloisters Square,
Perth WA 6850
Tel. (08) 9254 4300
Fax. (08) 9254 4399
Email: imo@imowa.com.au
Website: www.imowa.com.au
Gas referred to throughout this report refers to natural gas.
Gas Statement of Opportunities November 2015
Executive summary
This Gas Statement of Opportunities (GSOO) provides the Independent Market Operators
(IMO) independent assessment of the Western Australian (WA) domestic gas market over the
calendar years 2016 to 2025 (the forecast period). This GSOO includes forecasts of gas
demand and supply, an overview of gas infrastructure in the state, and emerging issues
affecting the gas industry. It is designed to assist Gas Market Participants and other energy
industry stakeholders to identify any potential shortfalls, constraints and opportunities in the
WA gas sector.
Key findings
The domestic gas market remains in excess supply
The potential gas supply for the forecast period remains significantly higher than forecast
demand. Potential gas supply is at least 107 TJ per day greater than demand over the next
four years in the base forecast scenario (see Figure ES.1). This excess supply is forecast to
rise to more than 400 TJ per day by the end of the forecast period as several large domestic
gas production facilities commence operation2.
Figure ES.1: Domestic gas market balance, 2016 to 2025
2,100
1,900
TJ per day
1,700
1,500
1,300
1,100
900
2016
Source:
2017
2018
2019
2020
2021
2022
2023
2024
2025
Expected gas demand range
High case potential gas supply forecast
Base case potential gas supply forecast
Total production capacity
NIEIR and IMO forecasts, 2015
Gorgon and Wheatstone domestic facilities are expected to have commenced production by 2018. This will be followed by an expansion to
the Gorgon domestic facility in 2020.
Page 1 of 105
Domestic gas supply has been affected by falling oil prices but is forecast to grow
over the forecast period
Potential gas supply over the forecast period (see Table ES.1) is lower than was presented in
the 2014 GSOO. This is due to the recent fall in international oil prices, which has reduced
domestic gas prices and caused uncertainty in the market. Gas producers will likely be less
willing to supply the domestic market in the short-term, at least until prices increase (or
stabilise) or additional production capacity comes online.
Table ES.1: Forecast potential supply (TJ per day), 2016 to 2025
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
Ave.
growth
p.a. (%)
Base
1,201
1,251
1,175
1,262
1,187
1,231
1,306
1,356
1,431
1,486
2.4
High
1,205
1,355
1,274
1,377
1,271
1,329
1,460
1,492
1,578
1,608
3.3
Source:
IMO forecasts 2016 to 2025
However, the IMO expects potential supply to increase towards the end of the period as
international oil prices recover3, which should lead to a higher domestic gas price and a more
attractive domestic market. The commencement of the Gorgon and Wheatstone domestic gas
projects in 2016 and 2018 will also increase production capacity and the availability of gas
supply.
Domestic gas demand is forecast to grow very slowly
The IMO expects domestic gas consumption to increase by less than 1 per cent per annum
over the forecast period, remaining almost flat in the base scenario forecast (see Table ES.2).
Table ES.2: Forecast demand (TJ per day), 2016 to 2025
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
Ave.
growth
p.a. (%)
Base
1,077
1,070
1,068
1,061
1,059
1,064
1,065
1,068
1,077
1,083
0.1
High
1,093
1,118
1,124
1,126
1,141
1,148
1,157
1,167
1,180
1,190
0.9
Source:
NIEIR forecasts 2016 to 2025
This slow growth is due to the expected decrease in gas-fired electricity generation in the
South West Interconnected System (SWIS), partially offset by increased gas consumption by
the following projects:
connection of the Sunrise Dam and Tropicana gold mines to the Eastern Goldfields Gas
Pipeline;
restart of Newman Power Station, which will supply electricity to the Roy Hill iron ore mine;
operation of the South Hedland Power Station;
The Organisation of Petroleum Exporting Countries expects oil prices to recover by 2020. See Bloomberg (2015).
Page 2 of 105
operation of the Pilbara Temporary Power Station; and
expansion of the Sino Iron magnetite mine.
Overall demand is lower than forecast in the 2014 GSOO, largely due to scheduled
decommissioning of the South-West Joint Venture Co-generation facility in 2016, which
consumes about 30 TJ per day.
The end of joint marketing will bring greater competition to the supply market and
may provide Gas Market Participants the opportunity to rebalance their gas
requirements
On 31 December 2015, the joint marketing authorisation for the North West Shelf Joint Venture
(NWS JV) and the Gorgon Joint Venture (Gorgon JV) will expire. The IMO understands that
participants of both JVs have not applied for an extension of their joint marketing
authorisations. From 1 January 2016, the IMO expects each participant to market its share of
gas production individually (commonly known as equity marketing).
The end of joint marketing authorisation for the NWS and Gorgon JVs is a significant change
to the dynamics of the WA domestic gas market. This is because it will increase the number
of individual gas suppliers, which is likely to increase competition. Greater competition will
provide opportunities for customers to renegotiate their gas requirements, or secure a more
competitive price.
The move to equity marketing has also eased concerns that the Karratha Gas Plant (KGP),
WAs largest gas production facility, may be retired. Domestic gas customers were uncertain
whether the KGP would continue to produce gas beyond 2020, when all the NWS JVs
domestic gas supply contracts are known to expire4. However, in October 2015 several
NWS JV partners confirmed they will market their uncontracted portion of KGP domestic
capacity separately, meaning it is unlikely any of KGPs capacity will be retired in the near
future.
There is greater opportunity for gas suppliers in the north of WA than in the
South West
Forecast demand growth is greater in areas that are not covered by the SWIS than those that
are connected to the SWIS. Table ES.3 shows demand forecasts for the base and
high scenarios in the SWIS and non-SWIS.
Table ES.3: Domestic gas forecasts for SWIS and non-SWIS (TJ per day), 2016 to 2025
Scenario
NonSWIS
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
Base
379
382
379
377
378
383
383
382
387
389
High
389
416
426
432
448
453
458
461
468
472
Base
698
689
689
684
681
681
682
686
690
694
High
704
702
698
694
693
695
699
706
712
718
SWIS
Source:
See IMO (2014a) for a list of known NWS gas supply contracts.
Page 3 of 105
Though around two-thirds of domestic gas is consumed in the Metropolitan and South West
regions, the bulk of this is by a small number of large industrial users and electricity generators.
Electricity demand is not forecast to increase significantly in the SWIS and excess capacity in
the electricity network (1,061 MW for the 2016-17 capacity year) suggests no new gas-fired
generation capacity will be required to meet demand in the near future.
The IMO is not aware of any new large industrial projects commencing operations in the
South West and Metropolitan regions during the forecast period. If any large industrial users
do commence operation, they are likely to connect to the SWIS for their energy needs rather
than require independent gas-fired electricity generation.
In regional WA the situation is different. Mines and industrial facilities tend to be located too
far from the SWIS to be able to draw on any of its spare electricity capacity. As a result, any
new major mining or processing facility would likely require its own on-site electricity
generation, with gas as a potential fuel source.
Several resources projects in regional WA are expected to commence operation or increase
gas consumption during the forecast period. The high forecast demand scenario includes a
further six prospective resources projects, all of which are located outside the SWIS. It is likely
some or all of these projects will require domestic gas supply.
The domestic gas market will benefit from greater transparency
As discussed, the end of joint marketing is expected to increase competition in the domestic
gas market. New production facilities such as Wheatstone, Gorgon and Pluto will increase
WAs production capacity. Further, gas infrastructure development such as the new
Eastern Goldfields Gas Pipeline (EGGP) and the recent upgrade of the Goldfields Gas Pipeline
(GGP)5 brings greater shipping capacity to WA. These are fundamental changes to the
domestic gas market, which create the potential for greater opportunity and efficiencies in the
gas sector.
The IMO considers improved data sharing, greater visibility of domestic gas flows, and more
transparent sales information will maximise the potential efficiencies that can be achieved.
Greater transparency provides Gas Market Participants with more information on how to
identify potential investment opportunities, which ultimately leads to more competitive pricing.
While the IMO understands a degree of confidentiality must be retained, the recent introduction
of WAs Gas Bulletin Board and the IMOs data visualisations have demonstrated that the
domestic gas sector can increase transparency without adversely affecting the market.
Changes to the domestic gas sector over the forecast period present a unique opportunity to
establish a more efficient market through the provision of information, with the potential for gas
trading.
The upgrade of the GGP was competed in September 2014, however utilisation rates have not yet increased.
Page 4 of 105
Gas resources and reserves

Approximately 92 per cent (158,373 PJ) of Australias total conventional gas resources are
located in WA and the waters around it6. WA is also estimated to hold at least 284,092 PJ7 of
unconventional resources in the form of tight and shale gas. Based on total estimates of
conventional and unconventional gas, WAs reserves may last up to 99 years beyond the
forecast period (see Figure ES.2).
Figure ES.2: Estimated WA gas resources and reserves, 2014
500,000
100
12
400,000
80
350,000
70
300,000
PJ
90
60
284,080
250,000
50
442,465
200,000
150,000
40
30
58,645
100,000
50,000
20
10,942
Years remaining beyond 2025
450,000
10
88,619
0
2P reserves
McKelvey's
EDR
McKelvey's
SDR
EIA shale
Tight gas
resources
estimates
(2013)
(official)
Total
Source:
EnergyQuest (2015), Geoscience Australia (2014), DMP (2013b) and DMP (2014)
Note:
McKelvey provides two estimates of reserves. Economic demonstrated resources (EDR) is a measure of the
resources that are established, analytically demonstrated or assumed with reasonable certainty to be profitable for
extraction or production under defined investment assumptions that are set by Geoscience Australia. Sub-economic
demonstrated resources (SDR) are similar to EDR in terms of certainty of occurrence but are considered to be
potentially economic only in the foreseeable future.
It should be noted that the estimates of conventional gas reserves are based on official 2P
(proven and probable) assessments, which are typically conservative. The Chevron-led
Gorgon and Wheatstone liquefied natural gas (LNG) projects, both of which are in the
Carnarvon Basin, are expected to commence production within the next two years. Each
project has an expected operating life of around 30 years, which takes these conventional
reserves beyond 2045.
6
7
Geoscience Australia (2014), gas basins in Australia (offshore and onshore).

Ibid.
Page 5 of 105
Gas transmission capacity

WA has nine transmission pipeline systems shipping gas to customers (see Figure ES.3). The
two largest systems are the Dampier to Bunbury Natural Gas Pipeline (DBNGP) and the GGP.
These account for almost 80 per cent of gas shipping capacity, and 90 per cent of total
domestic gas shipped throughout WA.
Figure ES.3: Gas transmission pipelines in WA
Source:
GBB data
In July 2014, APA Group announced it will construct the 292 km EGGP to ship gas to
AngloGold Ashantis Sunrise Dam JV and Tropicana JV gold mines8. The EGGP will connect
to the end of the existing gas lateral at the Murrin Murrin mine and will be registered as part of
the GGP. The extension is currently under construction and is anticipated to be completed late
2015 and be in service in 2016.
Peak utilisation rates indicate the Telfer Gas Pipeline is fully contracted. The DBNGP is not
fully contracted but is fully utilised at peak periods. Substantial shipping capacity appears to
be available on all other pipelines. This indicates that greater opportunity for major gas
customers exists in regional WA than the South West and Metropolitan areas.
APA Group (2014).
Page 6 of 105
Forecast assumptions
The IMOs domestic gas supply and demand forecasts are calculated using input assumptions
including:
forecast WA economic growth;
resources sector outlook;
LNG outlook;
domestic gas prices;
WA electricity consumption; and
production efficiency assumptions (in the resources sector).
These inputs are detailed in chapter 3 of this GSOO, and are provided to complement
Gas Market Participants assumptions when forming their own view of the domestic gas
market.
The IMOs assumptions are based on the latest available information and subject to internal
scrutiny and annual refinement. Key changes to assumptions compared with the 2014 GSOO
include an adjustment to account for the introduction of equity marketing and a relaxation of
efficiency assumptions in the resources sector. Previous forecasts assumed that businesses
in the resources sector would seek production efficiencies (such as switching to alternative
fuel sources) as a result of the high domestic gas prices. However, as the domestic gas price
has fallen during 2015, a move away from gas is less likely.
Other issues
This GSOO also considers other emerging issues that are likely to impact the WA gas sector
in the near future. The most pertinent issues include:
the introduction of full retail contestability in the WA retail electricity market, which carries
the potential for major energy retailers to enter the retail gas market;
the Australian Energy Market Commissions proposal to introduce a wholesale gas price
index for Australia, which would increase pricing transparency including in WA;
the use of domestic LNG and compressed natural gas facilities, which has the potential to
make gas supply accessible to remote areas of the state, while increasing gas demand as
a substitute for diesel; and
changes to the pricing of the LNG in the international gas market which are likely to have
an impact on domestic gas prices.
These issues are discussed further in chapter 6, and will be carefully monitored over the
forecast period.
Page 7 of 105
Contents
Executive summary ................................................................................................................................1
1.
Introduction and acknowledgements ...................................................................................... 11

1.1
1.2
2.
WA gas market overview and infrastructure .......................................................................... 13

2.1
2.1.1
2.1.2
2.1.3
2.2
2.3
2.3.1
2.3.2
2.3.3
2.3.4
2.4
3.
Gas demand forecast methodology ............................................................................. 38

Domestic gas demand forecast methodology ............................................................. 38
Total gas demand forecast methodology .................................................................... 42
Potential gas supply forecast methodology ................................................................. 43
The end of joint marketing of domestic gas for NWS and Gorgon JVs ....................... 45
Input assumptions ........................................................................................................ 46
WAs historical economic growth ................................................................................. 47
WAs forecast economic growth .................................................................................. 48
Resources sector outlook ............................................................................................ 49
LNG outlook ................................................................................................................. 51
Domestic gas price forecasts ....................................................................................... 54
Forecasts ................................................................................................................................... 58
4.1
4.1.1
4.1.2
4.2
4.2.1
4.2.2
4.3
5.
Overview of domestic gas demand.............................................................................. 13

Wholesale customers .................................................................................................. 14
The WA gas market structure ...................................................................................... 15
Customers supplied through the low pressure gas distribution network ..................... 18
Overview of domestic gas supply ................................................................................ 20
Overview of WA gas infrastructure .............................................................................. 23
Gas production facilities ............................................................................................... 23
Spare production capacity ........................................................................................... 24
Gas transmission pipelines .......................................................................................... 25
Multi-user gas storage facilities ................................................................................... 33
The WA LNG export market ........................................................................................ 34
Forecast methodology and assumptions ............................................................................... 38

3.1
3.1.1
3.1.2
3.2
3.2.1
3.3
3.3.1
3.3.2
3.3.3
3.3.4
3.3.5
4.
Structure of this report ................................................................................................. 11

Acknowledgements ...................................................................................................... 11
Domestic demand forecast .......................................................................................... 58

Gas demand by area, 2016 to 2025 ............................................................................ 60
Total gas demand (domestic and LNG exports) .......................................................... 62
Domestic supply forecast ............................................................................................. 63
Projected gas production capacity ............................................................................... 63
Potential gas supply forecast ....................................................................................... 66
Domestic gas market supply-demand balance ............................................................ 68
Gas reserves and resources .................................................................................................... 69

5.1
5.2
5.2.1
5.2.2
Gas resources in WA ................................................................................................... 69

Gas resources and reserves ........................................................................................ 71
Conventional gas resources ........................................................................................ 73
Unconventional gas resources .................................................................................... 74
Page 8 of 105
5.2.3
6.
Remaining resources and reserves ............................................................................. 76
Other issues ............................................................................................................................... 78

6.1
6.2
6.2.1
6.2.2
6.3
6.4
6.4.1
6.4.2
6.4.3
WA Government Electricity Market Review ................................................................. 78

Wholesale gas price indices ........................................................................................ 78
Australian index ........................................................................................................... 78
Asia Pacific index ......................................................................................................... 79
Domestic LNG and CNG ............................................................................................. 80
Other developments in the LNG market ...................................................................... 82
The potential rise of an Asia Pacific LNG trading hub ................................................. 82
Potential displacement of Australian LNG production ................................................. 83
Availability of unconventional gas to international gas supply ..................................... 83
Appendix A. Abbreviations ................................................................................................................ 84

Appendix B. Forecasts of economic growth .................................................................................... 87
Appendix C. Facilities included in potential supply, 2016 to 2025 ................................................ 89
Appendix D. Medium to long-term average (ex-plant) new gas contract price forecasts ........... 90
Appendix E. LNG requirement forecasts, 2016 to 2025 .................................................................. 91
Appendix F. Conversion factors ....................................................................................................... 93
Appendix G. References ..................................................................................................................... 94
List of tables
Table 2.1: Number of non-residential gas customers by retailer, 2009 to 2014 ................................... 19
Table 2.2: Domestic gas suppliers, Q3 2015 ........................................................................................ 21
Table 2.3: Domestic gas production facility average production, Q4 2014 to Q3 2015 ........................ 23
Table 2.4: Covered and uncovered capacity on the GBB ..................................................................... 31
Table 2.5: Potential projects situated in the vicinity of the EGGP ......................................................... 32
Table 2.6: Existing and committed LNG export facilities in WA as at 2015 .......................................... 35
Table 2.7: Prospective LNG export facilities under consideration in WA .............................................. 37
Table 3.1: Prospective gas demand projects included in the high gas demand forecasts, 2016 to
2025 ....................................................................................................................................................... 42
Table 3.2: Total gas demand scenarios, 2016 to 2025 ......................................................................... 43
Table 3.3: LNG utilisation rates (operational facilities only percentage of nameplate), 2010 to 2015 43
Table 3.4: Joint venture partners in the NWS and Gorgon projects ..................................................... 46
Table 3.5: Growth in key economic indicators, 2009-10 to 2013-14 ..................................................... 47
Table 3.6: Forecast growth in key economic indicators, 2015-16 to 2019-20....................................... 48
Table 3.7: Forecast gas price parameters, 2016 to 2025 ..................................................................... 55
Table 4.1: Forecast gas demand (TJ per day), 2016 to 2025 ............................................................... 58
Table 4.2: Domestic gas forecasts for SWIS and non-SWIS (TJ per day), 2016 to 2025 .................... 60
Table 4.3: New domestic gas production facilities that may be operational or upgraded by 2025 ....... 65
Table 4.4: Potential domestic supply forecasts (TJ per day), 2016 to 2025 ......................................... 67
Table 5.1: Attributes of WAs gas basins ............................................................................................... 72
Table 6.1: Current and potential domestic LNG and CNG facilities ...................................................... 80
Page 9 of 105
List of figures
Figure 2.1: Australias gas consumption, 2003-04 to 2013-14 .............................................................. 13
Figure 2.2: WAs primary fuel consumption by energy source, 2003-04 to 2013-14 ............................ 14
Figure 2.3: Distribution of facility consumption by average daily consumption, July 2014 to June
2015 ....................................................................................................................................................... 15
Figure 2.4: Gas market structure ........................................................................................................... 16
Figure 2.5: Electricity generation in the SWIS by fuel type, 2007 to 2014 ............................................ 17
Figure 2.6: Residential gas consumption per connection by state, 2009-10 to 2013-14 ...................... 18
Figure 2.7: Australias gas market supply (includes domestic gas, LNG and petroleum processing),
2004-05 to 2015-16 ............................................................................................................................... 20
Figure 2.8: Estimated market share of all WA domestic gas suppliers, Q1 2010 to Q3 2015 .............. 21
Figure 2.9 Domestic gas production capacity and actual gas production by operator, Q1 2010 to Q3
2015 ....................................................................................................................................................... 24
Figure 2.10: Production capacity availability, 1 August 2013 to 31 August 2015 ................................. 25
Figure 2.11: Gas transmission pipelines in WA..................................................................................... 26
Figure 2.12: DBNGP pipeline utilisation, 1 August 2013 to 30 September 2015 .................................. 27
Figure 2.13: Pipeline flows on the DBNGP by connection point and Zone, July 2014 to June 2015 ... 28
Figure 2.14: DBNGP contracted capacity by type of service ................................................................ 29
Figure 2.15: GGP pipeline utilisation, 1 August 2013 to 30 September 2015....................................... 30
Figure 2.16: GGP capacity and quantity of gas shipped, 2008-09 to 2014-15 ..................................... 31
Figure 2.17: MGSF injections and withdrawals, 1 August 2013 to 30 September 2015 ....................... 33
Figure 2.18: WA LNG export volume and prices, 1989-90 to 2014-15 ................................................. 34
Figure 2.19: Total estimated LNG export capacity in WA, 2015 to 2025 .............................................. 35
Figure 3.1: Domestic gas demand forecast model ................................................................................ 39
Figure 3.2: NIEIRs top-down forecast methodology ............................................................................. 40
Figure 3.3: Total gas demand forecast model ....................................................................................... 42
Figure 3.4: Comparison of GSP forecasts, NIEIR and WA Treasury, 2004-05 to 2019-20 .................. 49
Figure 3.5: Iron ore prices per dry metric tonne ($A/62 per cent iron content), January 2011 to June
2015 ....................................................................................................................................................... 50
Figure 3.6: Forecast medium to long-term average (ex-plant) new domestic contract gas prices (real),
2016 to 2025 .......................................................................................................................................... 56
Figure 3.7: Comparison of the medium to long-term forecast contract prices (real), December 2014 and
2015 GSOOs, 2016 to 2025 .................................................................................................................. 57
Figure 4.1: Domestic gas demand forecasts, 2016 to 2025 .................................................................. 58
Figure 4.2: Actual gas demand and forecasts for SWIS and non-SWIS, 2013 to 2025 ....................... 60
Figure 4.3: Total gas demand forecasts, 2016 to 2025 ......................................................................... 62
Figure 4.4: Projected gas production capacity in the WA domestic gas market, 2016 to 2025 ............ 63
Figure 4.5: Potential domestic gas supply forecasts, 2016 to 2025 ...................................................... 66
Figure 4.6: Gas market balance, 2016 to 2025 ..................................................................................... 68
Figure 5.1: Australian gas basins .......................................................................................................... 70
Figure 5.2: Number of exploration wells drilled, 1990 to 2015 .............................................................. 74
Figure 5.3: Estimated WA resources and reserves, 2014 ..................................................................... 76
Figure 5.4: Estimated gas reserves linked to domestic production facilities, August 2015 .................. 77
Figure 6.1: Diesel and LNG netback prices, January 2014 to August 2015 ......................................... 81
Figure 6.2: Type of LNG contracts traded, 2012 to 2014 ...................................................................... 82
Page 10 of 105
1.
Introduction and acknowledgements
The Gas Statement of Opportunities (GSOO) is published annually under the Gas Services
Information (GSI) Rules made under the Gas Services Information Act 2012 (GSI Act).
The GSOO contains information and assessments relating to long-term natural gas supply and
demand, and transmission and storage capacity in Western Australia (WA). This is the fourth
GSOO published in accordance with Part 6 of the GSI Rules, and contains forecasts for the
10-year period from 1 January 2016 to 31 December 2025 (forecast period).
1.1
Structure of this report
The structure of the report is as follows:
this chapter outlines relevant legislation and lists parties that have contributed to the
production of this GSOO;
chapter 2 provides a description of the size and structure of the WA gas market,
production capacity and infrastructure. It also reviews pipeline utilisation and provides a
historical overview of gas demand and supply;
chapter 3 describes the methodology used to forecast domestic gas demand and
potential gas supply for the forecast period. It includes an outlook of the WA economy and
key commodities;
chapter 4 provides forecasts of domestic and total demand and potential supply for the
WA domestic gas market for the forecast period. It also provides an estimate of total gas
demand, a projection of production capacity, and a view of the domestic gas balance over
the same period;
chapter 5 provides an overview of key hydrocarbon basins in WA and an estimate of

developed and undeveloped gas resources. It also contains an assessment of how long
these resources are expected to satisfy domestic gas consumption and liquefied natural
gas (LNG) production; and
chapter 6 presents other issues that may be relevant to the medium to long-term demand
and supply of natural gas in WA.
1.2
Acknowledgements
The Independent Market Operator (IMO) acknowledges the following industry stakeholders for
their assistance in the development of this GSOO:
Alcoa of Australia (Alcoa);
APA Group;
Argus Media;
Australian Petroleum Production and Exploration Association (APPEA);
AWE Limited;
Page 11 of 105
BHP Billiton;
Chevron;
CITIC Pacific;
DBNGP (WA) Transmission Pty Ltd (DBNGP Transmission);
Department of Mines and Petroleum (DMP);
Department of State Development (DSD);
EnergyQuest;
EVOL LNG;
Horizon Power;
Japan Australia LNG (MIMI);
Mobile LNG;
North West Shelf Joint Venture (NWS JV);
PE Wheatstone;
Quadrant Energy;
Rio Tinto;
Santos;
Shell Australia;
South32;
Synergy;
Wesfarmers;
Wood Mackenzie;
Woodside; and
other participants who have provided feedback during the development of this GSOO,
including current and previous members of the Gas Advisory Board (GAB).
Page 12 of 105
2.
WA gas market overview and infrastructure
This chapter provides an overview of the historical gas demand and supply in the WA market.
It also provides information on gas infrastructure, production capacity and pipeline utilisation.
2.1
Overview of domestic gas demand
Despite its relatively small population, WA is Australias largest gas consumer. The majority of
WAs consumption is driven by the resources sector and heavy industry. Residential
consumption is a relatively small component of total gas demand.
Figure 2.1 shows each states share of total gas consumption from 2003-04 to 2013-14.
PJ per annum
Figure 2.1: Australias gas consumption, 2003-04 to 2013-14

1,600
48%
1,400
42%
1,200
36%
1,000
30%
800
24%
600
18%
400
12%
200
6%
0%
WA
Source:
Vic
SA
Qld
NSW
NT
Tas
WA share of total (RHS)
Office of the Chief Economist (OCE) (2015a)
WA consumed approximately 533 PJ of gas in 2013-14, accounting for 38 per cent of all
domestic gas consumption in Australia. In WA, large volumes of gas are consumed by a
relatively small number of users. Major customers include LNG processing facilities (whose
gas consumption is not visible to the IMO9), mines, mineral processing facilities, gas
processing facilities, electricity generators, and large industrial plants. Most major customers
are connected to gas transmission pipelines. The gas distribution network accounts for less
than 10 per cent of natural gas consumption.
These major customers are either LNG or oil processing facilities that are situated before domestic gas production facilities and are classified
as behind the fence.
Page 13 of 105
Figure 2.2 shows WAs fuel consumption by energy source from 2003-04 to 2013-14.
Figure 2.2: WAs primary fuel consumption by energy source, 2003-04 to 2013-14
100%
90%
16%
16%
15%
14%
13%
15%
14%
13%
12%
13%
13%
31%
30%
30%
31%
33%
32%
32%
34%
36%
37%
35%
51%
52%
52%
52%
52%
51%
52%
51%
50%
48%
51%
80%
70%
60%
50%
40%
30%
20%
10%
0%
Gas
Source:
Oil
Coal
Renewables
OCE (2015a)
Natural gas accounts for more than half the states energy consumption10. The majority of WAs
gas consumption occurs in areas located outside of the South West Interconnected System
(SWIS). This is due to natural gas being more competitive for many consumers located in the
Goldfields, Mid-West, Pilbara and Kimberley regions.
2.1.1
Wholesale customers
2.1.1.1 Wholesale market structure

Wholesale customers are connected to gas transmission infrastructure. There are more than
80 industrial, manufacturing, electricity generation, domestic LNG and transport-related
facilities using gas in the domestic market. The average wholesale customer uses
11.7 TJ per day. As such, a single new wholesale customer is likely to increase aggregate gas
consumption in WA significantly.
10
OCE (2015a).
Page 14 of 105
Figure 2.3 shows the distribution of the average daily consumption for gas delivery points (each
delivery point is typically an individual gas consuming facility) between July 2014 and
June 2015.
Figure 2.3: Distribution of facility consumption by average daily consumption, July 2014 to June 2015
Number of delivery points
60
50%
45%
58
40%
36%
50
35%
30%
40
25%
20%
30
20%
17%
13%
20
15%
8%
11
10
3%
1
10%
5
5%
Per cent of daily average consumption
70
0%
< 10 TJ per
day
10-20 TJ per 20 - 30 TJ per 30 - 40 TJ per 40 - 50 TJ per

day
day
day
day
Number of delivery points
>50 TJ per
day
Per cent of daily average consumption
Source:
GBB data
Note:
These delivery points do not include transmission pipeline interconnections, but do include connections to the
distribution network.
Figure 2.3 highlights that:
over two thirds of facilities consume less than 10 TJ per day, but account for less than
20 per cent of total domestic gas usage; and
five large facilities, using more than 50 TJ per day, account for more than one third of total
gas consumption.
2.1.2
The WA gas market structure
Domestic gas is supplied to wholesale gas market customers either:
jointly from a specific joint venture;
directly by a single gas producer from its portfolio of gas production (equity marketing);
through an intermediary third party; or
through secondary gas trading platforms.
Short-term gas sales are increasing but remain a small part of the domestic market.
Page 15 of 105
Figure 2.4 shows how gas reaches the final customer in the WA domestic market.
Figure 2.4: Gas market structure
Gas
producer/supplier
Gas shipper
Gas pipeline
Gas storage (if

available/
required)
Low pressure
networks (if
required)
Gas customer
Natural gas is extracted from petroleum wells (mostly located in the Carnarvon and
Perth basins) and processed into a specification acceptable to the pipeline operator by the gas
producer/supplier. The processed gas is then transferred to the gas shipper (who acts on
behalf of the gas customer) who then works with the pipeline operator to ship the gas via high
or low pressure pipelines to the customer. Sometimes gas is stored to accommodate seasonal
variations in demand.
In WA, most domestic gas producers own gas reserves and operate gas production facilities11.
Producers sign gas supply agreements with gas shippers or gas customers directly.
The WA gas market operates predominantly under a contract carriage model12, where about
97 per cent of all domestic gas sales are made through long-term bilateral contracts13. Where
consumption is lower than maximum contracted quantities, secondary gas may be available
for short-term trading.
WA does not have a legislated exchange to trade short-term gas. Gas is traded through
gas swaps or via short-term agreements in an over-the-counter market. Short-term gas
requirements are typically filled by obtaining additional gas through:
existing gas supply agreements with gas suppliers;
short-term master sales agreement with gas suppliers;
bilateral trades with other market participants or third party gas suppliers;
pre-determined flexible commercial arrangements with existing gas retailers;
11
12
13
Only Tap Oil does not operate gas production facilities or produce its own gas.
A contract carriage model for the domestic gas market is where a shipping contract exists between the pipeline owners and the gas shipper.
The contract between these two parties typically defines the terms (which includes the quantity of capacity, conditions relating to capacity, cost
per GJ of capacity and quantity shipped etc.), rights, duties and liabilities of all parties to the contract. Other market structures include common
carriage, market carriage, network carriage and hybrids.
Contracted gas prices and quantities are generally not made public unless required by legislation, legal disputes, stock market regulation or
energy market rules.
Page 16 of 105
brokers; or
energy trading platforms.
The short-term market remains fragmented across multiple trading platforms, with little
transparency of gas prices or quantities being traded.
2.1.2.1 Gas demand from electricity generation in the SWIS
Historical gas consumption reported in the 2014 GSOO shows electricity generation accounts
for just over one quarter of total gas demand in WA14. The majority of gas consumption for
electricity generation occurs in the region served by the SWIS.
Figure 2.5 shows the proportion of electricity generated by fuel type in the SWIS between 2007
and 2014.
Figure 2.5: Electricity generation in the SWIS by fuel type, 2007 to 2014
100%
90%
11%
12%
6%
5%
4%
7%
46%
48%
47%
5%
5%
42%
43%
42%
40%
44%
2007
2008
2009
5%
8%
9%
9%
49%
50%
48%
37%
35%
37%
2012
2013
2014
80%
70%
60%
50%
40%
30%
20%
43%
42%
2010
2011
10%
0%
Gas
Source:
Coal
Renewable
Gas/diesel
Coal/gas
Diesel
IMO (2015)
The share of gas-fired generation has decreased from 42 per cent in 2007 to 37 per cent in
2014. The amount of electricity generated from gas in the SWIS has decreased 1 per cent
from 6,873 GWh in 2007 to 6,778 GWh in 2014. Over the same period, coal-fired electricity
generation has grown by 30 per cent, while generation from renewable sources more than
doubled.
In June 2015, the Australian Renewable Energy Target was revised15, requiring 23.5 per cent
of Australias energy to be derived from renewable sources by 2020. In the SWIS, 9.3 per cent
of sent-out generation was produced by renewable facilities in 2014. Given coal remains a
lower cost fuel source, new renewable generation sources will likely compete for the market
share of gas-fired generation. This will contribute to the decline of gas-fired electricity
generation in the South West.
14
15
IMO (2014a), Figure 6.3.

Minister for the Environment (2015).
Page 17 of 105
2.1.3
Customers supplied through the low pressure gas distribution network
2.1.3.1 Residential market

WAs residential gas demand is relatively low compared to other states. This is because WA
has a small population and a warm climate, meaning less gas is needed for heating than in
states with cooler climates such as Victoria and New South Wales. Distribution network
coverage is also lower. WAs network covers around 80 per cent of households in the
Perth Metropolitan area16 whereas Victorias network delivers gas to more than 90 per cent of
the Melbourne Metropolitan area17.
Figure 2.6 shows residential gas consumption per connection by state between 2009-10 and
2013-14.
Figure 2.6: Residential gas consumption per connection by state, 2009-10 to 2013-14
70
60
GJ per connection
50
40
30
20
10
0
2009-10
VIC
Source:
2010-11
SA
NSW
2011-12
WA
2012-13
QLD
TAS
2013-14
IMO estimates based on Australian Bureau of Statistics (ABS) (2014b) and OCE (2015a)
WAs residential use per connection is around 16 GJ per annum, roughly a third of the average
Victorian households usage. While the introduction of full retail contestability led to a new
participant entering the WA domestic gas market (Wesfarmers Kleenheat Gas) in 2013, it has
not resulted in significant increases in residential gas consumption.
Prior to Kleenheats entry, Alinta Energy was the only retailer supplying gas to residential
customers. In the twelve months to September 2015, 5.6 per cent of residential customers
changed retailers, an increase from 4.0 per cent in the previous year18. Despite the levels of
customer churn driven by price competition, aggregate residential demand has not changed
significantly.
16
17
18
ATCO (2012).
AER (2014).
REMCo (2015).
Page 18 of 105
2.1.3.2 Commercial and industrial market

Gas demand from commercial and industrial gas customers is relatively stable. As shown in
Table 2.1, there has been a shift in the relative market share of each retailer, although low
overall growth in the number of connections.
Table 2.1: Number of non-residential gas customers by retailer, 2009 to 2014
Retailer
2009
2010
2011
2012
2013
2014
Alinta Energy
8,024
8,191
8,359
8,468
8,355
8,282
Synergy
98
112
119
112
141
79
Wesfarmers (Kleenheat Gas)
19
20
232
WorleyParsons
31
33
34
31
36
33
8,172
8,338
8,513
8,612
8,552
8,626
2.0
2.1
1.2
-0.7
0.9
Total
Change from previous year (%)
Source:
Economic Regulation Authority (ERA) (2014)
Commercial and industrial customers on the low pressure distribution network account for
7 per cent, or 25 PJ, of total WA gas consumption. Even if the number of commercial and
industrial customers on the low pressure network was to increase more quickly over the
forecast period than it has over the last five years, it is unlikely to have a significant impact on
demand.
Page 19 of 105
2.2
Overview of domestic gas supply
WA is the largest supplier of natural gas in Australia, accounting for approximately 63 per cent19
of gas production in 2014-15. Figure 2.7 shows the share of Australian gas supply by state
since 2004-05.
Figure 2.7: Australias gas market supply (includes domestic gas, LNG and petroleum processing),
PJ per annum
2004-05 to 2015-16
3,500
70%
3,000
60%
2,500
50%
2,000
40%
1,500
30%
1,000
20%
500
10%
0%
WA
SA
NT
WA (OCE forecast)
WA share of total (RHS)
Source:
Vic
Qld
Rest of Australia (actual)
Rest of Australia (OCE forecast)
OCE (2015a), OCE (2015b) and OCE (2015c)
While total state production continues to increase, WAs share of national gas production has
declined. The decline is due to commencement of three LNG export projects in Queensland20.
19
20
OCE (2015a).
Asia Pacific LNG, Gladstone LNG and Queensland Curtis LNG.
Page 20 of 105
Table 2.2 lists companies that supplied the domestic gas market in the third quarter of 2015.
Table 2.2: Domestic gas suppliers, Q3 2015
Estimated average supply to WA domestic

market (TJ per day)
Company
AWE Limited
7.1
BHP Billiton
179.8
Empire Oil and Gas
6.1
Kufpec
12.4
NWS JV
501.6
Origin Energy
12.0
Quadrant Energy
189.2
Santos
146.7
Tap Oil
7.9
Total
1062.88
Source:
IMO estimates based on GBB data and respective company quarterly production reports
Note:
ERM sold its share of the Red Gully gas production facility and is no longer a WA gas supplier.
Figure 2.8 shows how the market share has varied for each domestic gas supplier between
2010 and 2015.
Figure 2.8: Estimated market share of all WA domestic gas suppliers, Q1 2010 to Q3 2015
100%
80%
60%
40%
20%
0%
Woodside
BHP Billiton
Chevron
Shell Australia
Quadrant Energy (Apache Energy)

Santos
BP Australia
Others
Source:
IMO estimates from quarterly production reports and GBB data
Note:
Respective shares of the domestic market are estimated using gas production from quarterly reports and applying
several assumptions. NWS JV partners supplying the domestic market are estimated using NWS JVs
(Domestic Gas JV (DGJV) and Incremental Pipeline Gas JV) shares outlined in Woodside (2012) and assumes the
DGJV retains all NWS JV legacy contracts.
Page 21 of 105
The NWS JV partners21, Quadrant Energy (formerly Apache Energy), Santos and BHP Billiton
account for more than 94 per cent of total gas production. Ten other entities account for the
remaining 6 per cent.
Each companys market share has been fairly stable over the last five years as the majority of
domestic gas was jointly marketed and sold. BHP Billiton has seen the biggest movement, with
its share increasing from 6 per cent in 2010 to around 18 per cent in 2015, due to
commissioning of its Macedon and Red Gully facilities in 2013.
The expiry of joint marketing authorisation for the NWS and Gorgon JVs, and the
commencement of the Wheatstone domestic gas facility, will mean the following additional
suppliers are likely to begin selling gas individually to domestic customers during the
forecast period:
BP Australia;
Chevron Australia;
Chubu Electric;
ExxonMobil;
Kyushu Electric;
MIMI;
Osaka Gas;
PE Wheatstone; and
Tokyo Gas.
Greater competition in the domestic gas supply market will create opportunities for major
gas customers to renegotiate their supply arrangements, and for producers to adjust their
position in the market.
21
BHP Billiton, BP Australia, Chevron, MIMI, Shell Australia and Woodside.
Page 22 of 105
2.3
Overview of WA gas infrastructure
2.3.1
Gas production facilities
Eight gas production facilities supply gas to the WA domestic market. These facilities have a
total gas production capacity of 1,477 TJ per day. Ninety-eight per cent of total domestic gas
production capacity is connected to the Carnarvon Basin. Table 2.3 shows production statistics
for WAs eight domestic gas production facilities.
Table 2.3: Domestic gas production facility average production, Q4 2014 to Q3 2015
Facility
Owner
Nameplate
capacity
(TJ per
day)
Peak
production
Oct 2014
to Sept
2015
Average production
Q4
2014
(TJ per
day)
Q1
2015
(TJ per
day)
Q2
2015
(TJ per
day)
Q3
2015
(TJ per
day)
Beharra
Springs
AWE Limited
and Origin
Energy
19.6
18.9
17.3
18.5
10.6
17.9
Dongara
AWE Limited
1.5
1.5
1.5
1.3
1.3
Devil
Creek
Quadrant
Energy and
Santos
220
240.2
78.2
101.1
80.6
77.0
KGP
BHP Billiton,
BP Australia,
Chevron,
MIMI, Shell
Australia and
Woodside
630
619.9
466.8
480.0
477.2
501.6
BHP Billiton
and Quadrant
Energy
200
216.0
148.0
153.6
178.4
179.8
10
9.9
7.4
8.3
8.1
7.6
390
344.9
284.3
264.7
268.4
276.2
1,477
1,451.3
1,003.5
1,027.7
1,024.6
1061.4
Macedon
Red Gully
Empire Oil
and Gas
Varanus
Island (2
facilities)
Quadrant
Energy and
Kufpec
(Harriet)
Quadrant
Energy and
Santos (East
Spar)
Total
Source:
GBB data
Page 23 of 105
Table 2.3 shows that the Karratha Gas Plant (KGP) remained WAs most productive facility
during 2015. There were concerns among domestic gas customers that some of KGPs
production capacity would be retired when the NWS JV domestic supply contracts expire22.
However, in November 2014 the NWS JV committed to supplying at least 100 TJ per day to
the WA domestic market23.
In October 2015, several NWS JV partners confirmed they will market their uncontracted
portions of domestic supply from the KGP separately (equity marketing) once joint marketing
expires on 1 January 2016. This means it is unlikely any of the KGPs production capacity will
be retired in the near future.
Two new large domestic gas production facilities, Gorgon and Wheatstone (both located in the
Carnarvon Basin), are expected to commence production in 2016 and 2018 respectively. An
expansion to the Gorgon domestic gas facility is also anticipated for 2020. When these facilities
are completed, they will add a combined production capacity of approximately 500 TJ per day,
increasing total domestic gas production capacity to 1,977 TJ per day by the end of 2024.
2.3.2
Spare production capacity
WA has a large amount of spare gas production capacity. Figure 2.9 shows the estimated
production capacity in WA, and the amount of gas actually produced between 2010 and 2015.
Figure 2.9 Domestic gas production capacity and actual gas production by operator, Q1 2010 to Q3 2015
1,600
1,400
TJ per day
1,200
1,000
800
600
400
200
0
Woodside
BHP Billiton
Estimated production capacity
Source:
Quadrant Energy (Apache Energy)

Others
Quarterly production reports from respective corporate websites and GBB data
Growth in domestic gas demand has not kept pace with increases in gas production capacity.
Despite the introduction of the Devil Creek gas production facility in 2011, and the Macedon
and Red Gully facilities in 2013, domestic gas production since 2010 has remained relatively
22
23
IMO (2013) provides a list of known NWS gas supply contracts.

Government of Western Australia (2014).
Page 24 of 105
flat. As a result, there is now substantial spare production capacity in the WA domestic market
that is able to support new gas demand.
Figure 2.10 shows the availability of domestic gas production capacity since 1 August 2013.
Percentage of nameplate capacity
Figure 2.10: Production capacity availability, 1 August 2013 to 31 August 2015

100%
80%
60%
40%
20%
0%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Per cent of days

Source:
GBB data
This shows that more than 80 per cent of total gas production capacity, or approximately
1,182 TJ per day is available almost all the time.
The highest peak gas consumption day recorded on the GBB was 1,188 TJ. This suggests the
maximum production capacity of 1,477 TJ per day is unlikely to be reached, meaning there is
sufficient available capacity to allow new gas customers to enter the WA market.
2.3.3
Gas transmission pipelines
All gas pipelines in WA are privately owned and operated. They are not interconnected with
gas pipelines in the east of Australia. The three principal operators of WA gas pipeline
infrastructure are:
APA Group;
DBNGP Transmission; and
DDG Operations Pty Ltd.
Page 25 of 105
Figure 2.11 illustrates the major gas transmission pipelines in WA.

Figure 2.11: Gas transmission pipelines in WA
Source:
GBB data
There are nine transmission pipeline systems shipping gas to customers. The two largest
systems are the Dampier to Bunbury Natural Gas Pipeline (DBNGP) and the Goldfields Gas
Pipeline (GGP). These account for almost 80 per cent of gas shipping capacity, and 90 per cent
of total domestic gas shipped throughout WA.
In July 2014, APA Group announced it will construct the 292 km Eastern Goldfields
Gas Pipeline (EGGP) to ship gas to AngloGold Ashantis Sunrise Dam JV and Tropicana JV
gold mines24. This new pipeline will connect to the end of the existing gas lateral at the
Murrin Murrin mine and will be registered as part of the GGP. The extension is currently under
construction and is anticipated to be completed late 2015 and be in service in 2016.
Peak utilisation rates indicate the Telfer Gas Pipeline is fully contracted. The DBNGP is not
fully contracted but is fully utilised at peak periods. The Fortescue River Gas Pipeline (FRGP),
which commenced operation at the end of the first quarter of 2015, has 40 per cent of its
capacity contracted out. The majority of this demand is from Transaltas 125 MW dual-fuelled
power station located at Fortescue Metals Groups (FMG) Solomon Hub.
24
APA Group (2014).
Page 26 of 105
2.3.3.1 The Dampier to Bunbury Natural Gas Pipeline

Figure 2.12 presents the DBNGPs average gas flow against nameplate capacity for
1 August 2013 to 30 September 2015.
Figure 2.12: DBNGP pipeline utilisation, 1 August 2013 to 30 September 2015
1000
900
800
TJ per day
700
600
500
400
300
200
100
DBNGP utilisation (7 day moving average)

Source:
Sep 2015
Aug 2015
Jul 2015
Jun 2015
May 2015
Apr 2015
Mar 2015
Feb 2015
Jan 2015
Dec 2014
Nov 2014
Oct 2014
Sep 2014
Aug 2014
Jul 2014
Jun 2014
May 2014
Apr 2014
Mar 2014
Feb 2014
Jan 2014
Dec 2013
Nov 2013
Oct 2013
Sep 2013
Aug 2013
DBNGP nameplate capacity
GBB data
Figure 2.12 shows:
the DBNGP shipped more than its nameplate capacity during winter 2014 and
summer 2015. This suggests non-firm shipping capacity over the year is not constant and
more information could be made available to the market;
there was a sharp drop in gas flow during August 2014 (this was due to Yara Pilbaras
fertiliser facility reducing its gas consumption); and
the DBNGP ships at least 750 TJ per day in any given day and the utilisation and available
capacity varies with the changes in temperature.
DBNGP Transmission, which operates the pipeline, provides multiple shipping services under
standard form contracts. It also offers spot capacity, park and loan services, and seasonal
capacity services25.
Full haul shipping is the most commonly used service on the DBNGP, transporting gas from
the major fields off the Dampier Coast in the north to WAs South West and Metropolitan
regions, where the majority of gas customers are located.
25
Non-standard capacity services are highly customised. More information can be obtained by contacting DBNGP directly.
Page 27 of 105
Figure 2.13 illustrates the relative magnitude of gas flows into and out of the DBNGP by each
injection and delivery point. It represents an estimate of the average utilisation of the nameplate
capacity for the DBNGP and also highlights which portions of the DBNGP are more utilised.
For example, Figure 2.13 shows there may be opportunities for the injection of gas into the
pipeline around the Red Gully gas production facility (where the Perth Basin is located) where
the average utilisation is 68 per cent.
80%
70%
60%
50%
40%
30%
20%
10%
0%
Karratha Gas Plant
Yara Fertilisers
Pluto
Robe River
Yurrali Maya Power Station
PEP Interconnect
PEP Interconnect
Maitland LNG Plant
Devil Creek
Sino Iron Project Power Station
Varanus Island
FRGP Interconnect
Gorgon
GGP Interconnect
Macedon
Ashburton
Exmouth Power Station
Carnarvon Power Station
MWP Interconnect
Nangetty Road
Mungarra Power Station
Mondarra T
Cockburn Cement
Mondarra I
Mondarra O
Eneabba
Red Gully
NewGen Neerabup Power Station
Pinjar Power Station
Ellenbrook
North Metro
South Metro
Wesfarmers LPG
Wesfarmers Gas
Australian Gold Reagents
Burton Place
Thomas Road
Kwinana Cogeneration Plant
CSBP Ammonia
Kwinana Power Station
Barter Road
NewGen Kwinana & Cockburn Power Stations
Kwinana Power Station
Kwinana Nickel Refinery
Alcoa Kwinana
Rockingham
Pinjarra Town
Alcoa Pinjarra
Pinjarra Power Station
Oakley Rd
Alcoa Wagerup
Wagerup Power Station
Harvey
Kemerton
Kemerton Power Station
Clifton Road
Worsley Alumina
Worsley Alumina, SWCJV Power Station
Cumulative percentage of total inlet flows
Figure 2.13: Pipeline flows on the DBNGP by connection point and Zone, July 2014 to June 2015
Dampier
Source:
Metro
South-West
Calculated from GBB data
The largest three net inflow points are at the KGP, Varanus Island and Macedon, which
together equal 90 per cent of total inlet flows. The largest three net outflow points are located
at the GGP interconnect, Alcoa Pinjarra and Alcoa Wagerup.
Page 28 of 105
Figure 2.14 shows contracted capacity by service type on the DBNGP.

Figure 2.14: DBNGP contracted capacity by type of service
900
800
700
TJ per day
600
500
400
300
200
100
0
Full Haul
Part Haul
2013-14
Source:
Back Haul
2014-15
DUET Group (2015)
As at 1 May 2015, 88.5 TJ per day of firm full haul capacity is available on the DBNGP26. This
presents an opportunity for additional gas shipping, which could supply new gas customers or
allow existing facilities to expand.
The fall in the contracted capacity for full-haul and part-haul services shows gas consumption
in the SWIS region has fallen, while consumption in outside of the SWIS has increased.
26
DBNGP Transmission (2015).
Page 29 of 105
2.3.3.2 The Goldfields Gas Pipeline

The GGP is WAs second-largest gas pipeline by capacity and throughput. Figure 2.15 shows
the GGPs average gas flow against the nameplate capacity for 1 August 2013 to
30 September 2015.
Figure 2.15: GGP pipeline utilisation, 1 August 2013 to 30 September 2015
250
TJ per day
200
150
100
50
GGP 7 day moving average

Source:
Sep 2015
Aug 2015
Jul 2015
Jun 2015
Apr 2015
May 2015
Mar 2015
Feb 2015
Jan 2015
Dec 2014
Nov 2014
Oct 2014
Sep 2014
Aug 2014
Jul 2014
Jun 2014
May 2014
Apr 2014
Mar 2014
Feb 2014
Jan 2014
Dec 2013
Nov 2013
Oct 2013
Sep 2013
Aug 2013
Aug 2013
GGP nameplate capacity
GBB data
Figure 2.15 shows:
the GGPs utilisation rate is significantly lower than nameplate capacity, indicating there
is a significant amount of spare shipping capacity; and
seasonal variation is minimal, indicating utilisation is largely unaffected by temperature

change and consists mainly of shipments for mining loads.
Page 30 of 105
The September 2014 upgrade of the GGP system has increased capacity from about 42 PJ to
72 PJ (see Figure 2.16). Although capacity has increased, throughput has not changed
because new gas customers have not yet commenced operations. In the coming year, the IMO
expects GGP utilisation to increase due to the start of the Roy Hill mining operations, from the
connection of AngloGold Ashantis Sunrise Dam and Tropicana gold mines to the GGP.
Figure 2.16: GGP capacity and quantity of gas shipped, 2008-09 to 2014-15
80
70
PJ per annum
60
50
40
30
20
10
0
2008-09
2009-10
2010-11
2011-12
Throughput
Source:
2012-13
2013-14
2014-15
Capacity
GGPs capacity is estimated from AER (2007 to 2014), APA Groups public announcements,
submissions to the ERA, GBB data and shipping quantities provided by APA Group
Only a portion of the GGPs capacity is covered by regulated access arrangements

(109 TJ per day). The remainder of the GGPs capacity is uncovered. Capacity and throughput
on the covered portion of the GGP is charged on a dollar per GJ per kilometre basis. The ERA
is currently reviewing the access arrangements for the covered portion of the GGP, and is
expected to finalise a decision by the end of 2015.
Table 2.4 shows the amount of spare capacity on the GGP as at July 2015.
Table 2.4: Covered and uncovered capacity on the GBB
March 2014
Spare covered capacity (TJ per day)
Total covered capacity (TJ per day)
Total uncovered capacity (TJ per day)
Source:
July 2015
3.5
0.0
108.9
109.0
46.1
93.5
APA Group (2015) and IMO (2014b)
While the data in Table 2.4 suggests there is no firm capacity available on the covered portion
of the GGP, throughput and total pipeline capacity data indicates there remains significant
uncovered capacity available. This presents opportunities to gas customers in the Pilbara and
Goldfields regions who may seek to utilise this spare capacity.
Page 31 of 105
2.3.3.3 The Eastern Goldfields Gas Pipeline

APA Group expects the EGGP to be operational early 2016. APA Group has applied to register
the EGGP as part of the GGP system, therefore the EGGPs capacity is unspecified.
Although the pipeline has been constructed to ship gas to the Sunrise Dam and Tropicana gold
mines, the IMO estimates the EGGP will have sufficient spare capacity to meet demand from
other mines in the vicinity. Table 2.5 presents a non-exhaustive list of potential projects that lie
within 30 km of the EGGP.
Table 2.5: Potential projects situated in the vicinity of the EGGP
Project type
Estimated distance from the

EGGP
Granny Smith
Gold
< 1 km
Mount Morgans
Gold
< 2 km
NiWest
Nickel
10 km
Mt Weld
Phosphate/Rare Earths
10 km
Gold
15 km
Laverton
Gold/Town
20 km
Fortitude
Gold
25 km
Windarra
Nickel
25 km
Second Fortune
Gold
30 km
Brightstar Alpha
Gold
30 km
Site name
Red October
Source:
APA Group and DMP (2015c)
Note:
The majority of the outlined projects are new projects and are not connected to existing gas pipelines.
2.3.3.4 Prospective pipeline developments

There are two new pipelines currently under consideration; the Bunbury to Albany Pipeline and
the Great Northern Pipeline.
The Bunbury to Albany Pipeline is expected to be 350 km long and have a nameplate capacity
of around 12 TJ per day. No planned completion date has been confirmed for this prospective
pipeline. The Great Northern Pipeline will be between 550 km and 630 km long, and is
anticipated to be completed after 2020.
Due to the uncertainty surrounding these two prospective projects, neither have been
considered in the potential supply forecasts.
Page 32 of 105
2.3.4
Multi-user gas storage facilities
APA Groups Mondarra Gas Storage Facility (MGSF) is currently the only operational
multi-user storage facility in WA27. Figure 2.17 shows the volume of gas injected into and
withdrawn from the MGSF aggregated by month.
Figure 2.17: MGSF injections and withdrawals, 1 August 2013 to 30 September 2015
2,000
TJ per month
1,500
1,000
500
-500
Injections
Source:
Sep 2015
Aug 2015
Jul 2015
Jun 2015
May 2015
Apr 2015
Mar 2015
Feb 2015
Jan 2015
Dec 2014
Nov 2014
Oct 2014
Sep 2014
Aug 2014
Jul 2014
Jun 2014
May 2014
Apr 2014
Mar 2014
Feb 2014
Jan 2014
Dec 2013
Nov 2013
Oct 2013
Sep 2013
Aug 2013
-1,000
Withdrawals
GBB data
The large injections in late 2013 were due to the initial fill of gas required to operate the MGSF,
and a contractual agreement with Synergy28 to inject gas into the facility.
The quantities of gas transferred rarely reach the MGSFs maximum injection capacity of
70 TJ per day and maximum withdrawal capacity of 150 TJ per day. This suggests there is
scope for market participants to use this facility to manage their gas requirements and/or
contractual obligations to a greater extent.
27
28
IMO (2013) provides further information about other prospective gas storage facilities.
According to the WA Minister for Energy Media Statement (2011), MGSF has been contracted by Synergy (formerly Verve Energy) to
provide up to 90 TJ per day for up to 60 days should WA face a gas supply disruption. This reduces the availability of firm storage capacity
for other gas market participants to adequately balance their gas usage when there is a gas supply disruption.
Page 33 of 105
2.4
The WA LNG export market
Figure 2.18 shows the historical quantities and price of WA LNG exports from 1989-90 to
2014-15.
Figure 2.18: WA LNG export volume and prices, 1989-90 to 2014-15
1,200
$800
$700
1,000
PJ per annum
800
$500
600
$400
$300
400
A$ per tonne
$600
$200
200
$100
Annual LNG exports (LHS)

Source:
2014-15
2013-14
2012-13
2011-12
2010-11
2009-10
2008-09
2007-08
2006-07
2005-06
2004-05
2003-04
2002-03
2001-02
2000-01
1999-00
1998-99
1997-98
1996-97
1995-96
1994-95
1993-94
1992-93
1991-92
1990-91
$0
1989-90
Price (RHS)
DMP (2015b)
In summary:
large increases in LNG exports are related to the commencement of new LNG facilities;
WAs LNG exports only increased by 2 per cent from 2013-14 to 2014-15 when there were
no new LNG export facilities;
while the quantity of LNG exports continues to increase, average export prices have fallen
from A$719 to A$705 per tonne in 2014-15, a 2 per cent decrease from 2013-14;
WAs nominal LNG export prices remained relatively stable from 1989-90 to 1998-99
before rising from 1999-2000 until 2008-09; and
in 2009-10, LNG prices fell due to a drop in international oil prices during the global
financial crisis. Since then average LNG prices have steadily recovered, exceeding
A$700 per tonne from 2013-14.
According to OCE forecasts, nominal LNG prices are expected to decrease in 2015-16 due to
lower oil prices.
Page 34 of 105
Figure 2.19 shows WAs existing, upcoming and prospective LNG facilities.
Figure 2.19: Total estimated LNG export capacity in WA, 2015 to 2025
PTTEP Cash Maple

FLNG
Bonaparte
70
60
LNG export capacity (mtpa)
Scarborough
50
Browse
40
Gorgon Train 4
30
Prelude FLNG
Wheatstone
20
Gorgon Train 1, 2 & 3
10
Pluto Train 1
North West Shelf
Total committed
capacity
Source:
Respective corporate websites, Wood Mackenzie and government publications
Note:
Projects above the committed capacity line are prospective (pre-final investment decision) and may not be realised in
the 2016 to 2025 period. Other potential LNG projects, including Caldita-Barossa, Crux, Equus, Poseidon, Thebe and
Crown, are not reflected in this figure as there are no known indicative dates and/or export capacities. The Equus
project does alter the export capacity as it is likely to be tolled through the NWS. PTTEP refers to PTT Exploration
and Production Public Company Limited.
Table 2.6 presents the nameplate capacity of the existing and committed WA LNG export
facilities.
Table 2.6: Existing and committed LNG export facilities in WA as at 2015
LNG Facility
Nominal
capacity (mtpa)
Commissioned date/
expected commissioning
Status
NWS Train 1
2.5
1989
Operational
NWS Train 2
2.5
1989
Operational
NWS Train 3
2.5
1992
Operational
NWS Train 4
4.4
2004
Operational
NWS Train 5
4.4
2008
Operational
Pluto Train 1
4.3
2012
Operational
Gorgon Train 1
5.2
Anticipated to be operational in
early 2016*
Under construction
Gorgon Train 2
5.2
second half of 2016*
Under construction
Page 35 of 105
LNG Facility
Gorgon Train 3
Nominal
capacity (mtpa)
Commissioned date/
expected commissioning
Status
5.2
in the first half of 2017*
Under construction
mid-2017**
Under construction
early 2018**
Under construction
2017
Under construction
Wheatstone Train 1
8.9
Wheatstone Train 2
Prelude FLNG
3.6
Total LNG export

capacity (by 2025)
48.7
Source:
North West Shelf corporate, Chevron Australia, Wood Mackenzie and APPEA websites
Note:
*Chevrons 2Q and 3Q earnings announcements. **Wood Mackenzie estimates.
In summary:
WAs current LNG export production capacity is 20.6 mtpa;
the NWS JVs LNG facility is currently the largest operational LNG export facility in
Australia, with almost twice the export capacity of the next largest facility, the
Queensland Curtis LNG facility; and
when the Gorgon, Wheatstone and Prelude facilities are complete, WAs LNG export
capacity will increase by approximately 28.1 mtpa by the end of 2025, to a total of
48.7 mtpa29. This will increase WAs share of international LNG capacity to between
12 and 15 per cent.
29
Woodside (2012). While the nominal LNG capacities are often reported, these capacities are almost never reached. Typical utilisation rates
for WA LNG facilities for 2008 to 2012 have ranged from more than 90 per cent to 97.6 per cent of maximum capacity.
Page 36 of 105
2.4.1.1 LNG capacity under consideration in WA

Approximately 40 mtpa of additional LNG projects in WA are under consideration, but yet to
attain a favourable final investment decision. Table 2.7 lists the projects under consideration.
Table 2.7: Prospective LNG export facilities under consideration in WA
LNG export facility
Bonaparte
Browse
Expected
operator
Expected
capacity
(mtpa)
Type
Expected final
investment
decision
Engie
(formerly
GDF Suez)
or Santos
Likely to be
offshore, under
consideration*
Unknown*
12**
Three FLNG
facilities, FEED
phase
FID Anticipated to
be 2H-2016**
Woodside
Equus
Hess
Gorgon Train 4
Pluto Train 2
PTTEP Cash Maple
Scarborough^^
Not applicable.
However, gas
is likely to be
tolled through
NWS LNG
facility***
Onshore, LNG is
likely to be tolled
through NWS
Karratha gas
plant
Hess signed a nonbinding letter of

intent with NWS to
toll gas through the
NWS LNG
facility***
Expected to be in
2017 or later
Chevron
5.2
Onshore
Anticipated to be
after the
completion of
Gorgon Train 3^^^
Woodside
4.3
Onshore
Unknown
PTTEP
2^
Potentially FLNG^
Unknown
6 or 7
Single FLNG
facility with five
trains and 7
production wells
initially
Pre-FEED phase,
Anticipated to be
2017 or later
ExxonMobil
Total WA LNG export

capacity under
consideration
~40.1 mtpa
Source:
Respective corporate websites
Notes:
*SMH (2015). **Woodside (2015). *** Hess (2014). ^Wood Mackenzie estimates. ^^According to Australian Mining
(2014a) the Scarborough project has obtained environmental approval from the Commonwealth Government for an
FLNG project. ^^^According to Australian Mining (2014b), the fourth LNG train for the Gorgon project will not be decided
until Chevron has gained a better understanding of costs in Australia.
Page 37 of 105
3.
Forecast methodology and assumptions
This chapter describes the IMOs methodology for producing the gas demand and supply
forecasts in this GSOO. It includes a summary of the inputs used to create each forecast, and
a description of the economic assumptions and domestic price forecasts that underpin them.
The forecasting methodology is largely unchanged from previous GSOOs, however,
forecasting assumptions have been updated to reflect the most recent information available.
3.1
Gas demand forecast methodology
The IMO presents domestic and total gas demand forecasts for WA.
The domestic demand forecast considers expected gas consumption by domestic

users. This includes all major industrial and commercial loads, electricity generators and
customers connected to the gas distribution network.
The total gas demand forecast comprises the domestic demand forecast, plus an
estimate of the gas required for LNG export. The total gas demand forecast presents an
overall assessment of demand for natural gas produced by WA, as required by
section 104(2)(b) of the Gas Services Information Regulations 2012.
Sections 3.1.1 and 3.1.2 describe the IMOs methodology for producing each of these
forecasts.
3.1.1
Domestic gas demand forecast methodology
The IMO appointed the National Institute of Economic and Industry Research (NIEIR) to
produce forecasts of domestic gas demand for each year of the forecast period (2016 to 2025).
NIEIRs forecasts have been tested and challenged by the IMO, and were developed using the
following inputs:
gas-fired electricity generation in the SWIS;
consumption by customers connected to the gas distribution system;
consumption by transmission-connected customers;
gas-consuming projects expected to come online during the forecast period;
domestic gas price outlook;
forecast WA economic growth;
forecast international economic growth; and
outlook for prices of key WA export commodities (including iron ore, alumina, gold and
LNG).
NIEIR produced two forecast scenarios of domestic gas demand; a base and a high scenario:
Page 38 of 105
the base scenario only includes gas-consuming projects that are certain to be in operation
during the forecast period. This includes established loads and future projects that have
attained a favourable final investment decision30. The base scenario does not include
prospective gas projects; and
the high scenario includes prospective gas-consuming projects with a sufficient degree
of likelihood that they will operate during the forecast period. Prospective projects are
assessed against criteria detailed in section 3.1.1.4.
The base and high scenarios represent the lower and upper bounds of a reasonable gas
demand range for the forecast period. Gas market participants may wish to consider this range
when assessing market opportunities and investment decisions.
Figure 3.1 shows NIEIRs domestic gas demand forecast model.
Figure 3.1: Domestic gas demand forecast model
SWIS
electricity
generation
and
distribution
network use
Transmission
connected
customers
Gas price
adjustments
Prospective
gas demand
(High scenario
only)
Domestic gas
demand
The following sections summarise how NIEIR applies this model to generate the forecasts.
3.1.1.1 SWIS electricity generation and gas distribution network use
The first step is to consider gas consumption in the South West region, where the majority of
the states population is located. Gas demand in this region is driven by electricity generation
and gas consumption by users connected to the gas distribution network.
Gas required to generate electricity in the SWIS is estimated using the electricity forecasts
published in the 2014 Electricity Statement of Opportunities. NIEIR applies assumptions
regarding the type (for example, peaking or mid-merit) and efficiency of gas-fired generators,
as well as the impact of alternative fuel sources.
30
Either publicly announced by the proponents, reported by DSD or OCE by the end of September 2015.
Page 39 of 105
Gas distribution network demand is estimated using the top-down econometric model
summarised in Figure 3.2.
Figure 3.2: NIEIRs top-down forecast methodology
National economic environment projection

State economic projection
SWIS region economic projections
SWIS region gas demand modelling
NIEIRs model incorporates economic indicators such as state final demand, gross state
product, government investment, private consumption spending, and population. NIEIR
considers economic growth forecasts at a national, state and regional level, which are then
disaggregated into economic projections for the SWIS region.
An overview of the economic assumptions used in the forecast is provided in section 3.3.
3.1.1.2 Transmission connected customers
NIEIRs model then considers customers connected to the gas transmission network. These
customers are typically large mining or processing facilities, many of which are located in the
Goldfields, Mid-West and Pilbara regions of WA.
Transmission customers account for around 60 per cent of WA gas demand. These large loads
are forecast using historical data drawn from the GBB and from pipeline operators, combined
with economic assumptions and international commodity prices. The IMO also meets with
major customers to ascertain the latest information about each facility and the customers
corresponding forward plans.
3.1.1.3 Gas price adjustments
Demand forecasts are then adjusted to account for medium to long-term average domestic
gas price forecasts. This includes applying an estimate of the demand elasticity to the
price-sensitive portion of the gas demand forecast (typically electricity generation and
distribution-connected customers).
3.1.1.4 Prospective gas demand
The high demand scenario includes an estimate of gas consumption from prospective projects.
Prospective projects are those which are likely to:
switch from diesel to gas; or
be developed and consume gas during the forecast period.
Page 40 of 105
These projects are then shortlisted, with each project required to meet at least two of the
following criteria to be considered for inclusion in the high scenario demand forecast:
The project will potentially consume more than 10 TJ per day.
The project is within 20 km of gas transmission pipelines that are under construction,
pipelines that have spare shipping capacity, or new pipelines that have attained a
favourable final investment decision.
The project proponent has a commercial arrangement with a gas pipeline/gas storage
company to connect physical infrastructure to withdraw gas.
It has been reported that the project will use or potentially use existing domestic
compressed natural gas (CNG) or LNG facilities.
The project proponent has applied to the IMO to receive Capacity Credits, either as an
electricity generator using gas, or as a dual-fuelled facility that can operate on natural gas.
The project has a value of greater than A$1 billion.
The project proponent has attained its required funding for the project.
The project proponent has announced its intention to consume gas.
The project proponent has completed investigations into converting from diesel to gas for
its operations.
The project has been identified by existing pipeline operators as a potential gas project.
The shortlisted projects then are assessed further to ascertain the likelihood they will consume
gas during the forecast period. Only those projects with a high degree of certainty to proceed
are included in the high demand forecast.
For this GSOO the initial project list was reduced from around 200 to 51 projects using the
above criteria. From there, the 51 eligible projects were revised down to six prospective
projects that are included in the high forecast. The remaining shortlisted projects were
excluded for one or more of the following reasons:
The project relied on the construction of other infrastructure to transport its minerals (for
example, Oakajee, Ashburton, Esperance Ports, common user rail system in the Pilbara).
The project relied on improved commodity prices in the future (for example, uranium,
magnetite iron).
The project relied on the availability of financing.
The project is located in the SWIS where there is significant spare capacity for electricity
generation.
The project proponent had not conducted any environmental studies.
The project proponent did not appear to have committed to a project commencement date.
Page 41 of 105
Table 3.1 presents an estimate of the cumulative impact of the six prospective gas demand
projects included in the high gas demand forecast.
Table 3.1: Prospective gas demand projects included in the high gas demand forecasts, 2016 to 2025
2016
Prospective project
consumption (TJ per day)
Number of prospective
projects
2017
2018
2020 and
beyond (for each
year)
2019
4.0
24.5
35.1
40.1
51.2
Source:
IMO estimates
3.1.2
Total gas demand forecast methodology
To develop the total gas demand forecast, the IMO estimates the amount of gas required for
WAs LNG sector and adds it to NIEIRs domestic gas demand forecast (see Figure 3.3).
Figure 3.3: Total gas demand forecast model
Domestic
gas demand
forecasts
Gas
feedstock
for LNG
exports
(estimated)
Gas used
for
processing
LNG
(estimated)
Total gas
demand
The IMO develops two scenarios for total gas demand base and high. LNG forecasts are
developed using historical data from existing LNG facilities and publicly-available information
on the proposed consumption and commencement date of new LNG facilities.
It is important to note that unlike the domestic demand forecast, the base scenario for total gas
demand is not restricted to projects that have reached a favourable final investment decision.
For example, Chevrons Gorgon LNG expansion is included in the base scenario because
Chevron has already commenced marketing LNG from Gorgon Train 431. This indicates the
project is likely to proceed within the forecast period.
31
Argus Media (2014).
Page 42 of 105
Table 3.2 outlines the assumptions applied in each total gas demand scenario.
Table 3.2: Total gas demand scenarios, 2016 to 2025
Parameter
Base scenario
High scenario
Domestic gas
demand
forecasts
Base
High
Gas feedstock
for LNG exports
NWS (16.3 mtpa)
Pluto LNG (4.3 mtpa)
Gorgon LNG (15.6 mtpa in 2015),
Includes assumptions in Base

scenario (but assumes a 2019
start for the Gorgon LNG
expansion)
Wheatstone LNG (4.45 mtpa in

2016, and 4.45 mtpa in 2017)
Bonaparte (2.0 mtpa in 2019)
Prelude FLNG (3.6 mtpa in 2017)
Wheatstone LNG expansion (4.45

mtpa in 2020)
Gorgon LNG expansion (5.2 mtpa

in 2020)
Pluto LNG expansion (2.2 mtpa in

2021)
Equus (2 mtpa in 2023)
Gas used for

processing LNG
8 per cent of total LNG feedstock
8 per cent of total LNG feedstock
Source:
IMO
Note:
Processing estimates are assumed by taking the low range of processing estimates outlined in Tusiani, Michael D.
and Shearer, Gordon (2007).
LNG feedstock requirements are adjusted by the average utilisation rate of LNG facilities
operating in WA from Q1 2010 to Q3 2015 outlined in Table 3.3.
Table 3.3: LNG utilisation rates (operational facilities only percentage of nameplate), 2010 to 2015
Facility
2010
2011
2012
2013
2014
2015 (to
end Q3)
Average
KGP
101.4
98.4
95.5
93.5
100.8
96.3
97.9
Pluto
NA
NA
93.6
93.4
108.2
96.1
95.9
Source:
Woodside (2010 to 2015)
Note:
Utilisation is calculated using nameplate capacity, as the IMO does not have access to LNG facility outage data, the
utilisation data may periodically exceed 100 per cent.
A 98 per cent utilisation rate applicable from when they commence production is assumed for
LNG facilities that are still under construction (Gorgon and Wheatstone).
3.2
Potential gas supply forecast methodology
The IMOs potential gas supply forecast considers two important factors:
1.
gas production capacity; and
2.
an estimate of gas producers willingness to supply.
Page 43 of 105
While gas production capacity is an indicator of supply, to base the supply forecast solely on
capacity would overstate the amount of gas available to the market. This is because the bulk
of gas for the WA domestic market is supplied via confidential supply agreements between
wholesale gas suppliers and customers.
Gas producers are not required to provide additional supply to the domestic market on top of
these existing agreements. Any decision to do so is entirely discretionary and is influenced by
commercial, economic and operational factors. Therefore, while gas producers may have
spare capacity, the availability of this potential supply to the domestic market is determined by
the prices that can be negotiated and the timing of the requirement.
The IMO forecasts potential gas supply by:
1.
estimating the production capacity of each gas producer;
2.
estimating the quantity of gas already contracted to the WA domestic market (after
considering outages);
3.
estimating the quantity of additional (uncontracted) supply that can be made available from
each gas producer at the forecast domestic gas price; and
4.
aggregating these values to create the overall estimate.
The IMOs forecast model assumes a gas producer will only supply to the domestic market if
it is commercially viable, and is managing its operations as a portfolio32. Inputs to the supply
forecast model include:
the availability of uncontracted gas production capacity;
remaining reserves;
minimum operational requirements of gas production plants;
estimated production costs33;
availability of production capacity34;
estimated contracted level35;
the required rate of return on investment (LNG-linked or domestic only)36;
the share of gas reserves available to the gas producer;
cost of alternative fuels;
the opportunity cost of selling the gas;
prevailing and projected exchange rates; and
government regulation.
32
33
34
35
36
The model also allows the consideration of joint and equity marketing by different entities.
The production costs for facilities applied in this study are estimated by the IMO using the latest Wood Mackenzie cost estimates.
This is calculated using an annualised average of capacity for each facility using GBB data for 1 August 2014 to 30 September 2015.
These are IMO estimates.
Assumed to be a minimum of 10 per cent.
Page 44 of 105
The potential gas supply model assumes there are no constraints to pipeline capacity.
The model also assumes a linear relationship between additional (uncontracted) supply and
the domestic gas price. This assumption is applied as follows:
zero uncontracted supply is assumed if the forecast domestic gas price does not exceed
the cost of gas production plus the assumed rate of return;
for LNG-linked facilities, all spare capacity (subject to the availability rate for the facility) is
assumed available for uncontracted supply if the domestic gas price reaches or exceeds
the LNG netback price; and
for domestic gas only facilities, all spare capacity (subject to the availability rate for the
facility) is assumed available for uncontracted supply if the domestic gas price reaches an
assumed rate of return37 on top of the cost of production.
With the current joint marketing arrangements for domestic gas set to expire from
1 January 2016, the IMO has updated its assumptions from the 2014 GSOO by allowing for
separate marketing of uncontracted gas supply by the NWS and Gorgon JVs until the end of
the forecast period.
3.2.1
The end of joint marketing of domestic gas for NWS and Gorgon JVs
Gas from the NWS JV has been jointly supplied since 1984. Joint marketing for the Gorgon JV
was approved in 200938. On 31 December 2015, the joint marketing authorisation for both JVs
will expire.
The IMO understands that participants of the NWS and Gorgon JVs have not applied for an
extension of their respective joint marketing authorisations. This means from 1 January 2016,
each market participant is expected to market its share of gas production from their respective
JVs individually. The IMO has factored this change into the potential gas supply forecast
methodology.
The end of joint marketing authorisation for the NWS and Gorgon JVs is a significant change
to the dynamics of the WA domestic gas market. This is because it will increase the number
of individual gas suppliers, which will increase competition. Greater competition may provide
opportunities for customers to renegotiate their gas requirements, or secure a more
competitive price. However, this does not influence all the existing NWS gas contracts.
The end of joint marketing will also influence how domestic gas is managed from the suppliers
perspective. Market participants are more likely to adopt a portfolio approach to managing
domestic gas contracts and supply risks. The majority of NWS and Gorgon JV partners also
own rights to gas supply from other WA domestic gas production facilities (for example,
BHP Billiton also owns a portion of production from the Macedon project).
There is also potential for new domestic joint supply arrangements. Some NWS or Gorgon JV
partners may consider entering into new joint marketing agreements (subject to their share of
the domestic market and/or authorisation from the Australian Competition and Consumer
Commission).
37
38
Estimated to be 25 per cent.

Australian Competition and Consumer Commission (2009).
Page 45 of 105
Table 3.4 lists the NWS and Gorgon JV partners. Only BHP Billiton currently supplies gas to
the domestic market via the Macedon gas production facility. The expiry of the joint marketing
authorisation, coupled with the commencement of the Gorgon facility will likely increase the
number of domestic gas suppliers from 6 to 15.
Table 3.4: Joint venture partners in the NWS and Gorgon projects
Company
Current JV
Equity share
BHP Billiton
NWS (DGJV, IPJV)
8.33%, 16.67%
BP
NWS (DGJV, IPJV)
16.67%, 16.67%
NWS (DGJV, IPJV) and

Gorgon
16.67%, 47.3% (Gorgon)
Chubu Electric Power
Gorgon
0.417%
ExxonMobil
Gorgon
25%
NWS (IPJV)
16.67%
Gorgon
1.25%
NWS (DGJV, IPJV) and

Gorgon
8.33%, 16.67% (NWS)
Tokyo Gas
Gorgon
1%
Woodside
NWS (DGJV, IPJV)
50%, 16.67%
Chevron
MIMI
Osaka Gas
Shell
25% (Gorgon)
Source:
Corporate websites and public reports
Note:
DGJV Domestic Gas JV, IPJV Incremental Gas JV. Totals may not add to 100 per cent due to rounding.
3.3
Input assumptions
There is a direct relationship between the economic environment and gas supply and demand
in the WA market. Historically, gas supply and demand has been influenced by:
productivity of large commercial and industrial loads, whose gas consumption typically
increases or decreases in line with the changes in the level of economic activity in the
South West region of WA;
the level of discretionary spending by small gas users;
increased electricity consumption, which in turn drives investment in new gas-fired

generation. Note the influence of this factor has declined as renewable electricity
generation technology becomes an attractive alternative to gas and demand side
response has an effect;
the outlook for export-based commodities in the resources sector. Strong growth in
commodity prices tends to stimulate investment in new mining operations and minerals
processing facilities. Such investment has historically driven demand for gas in regional
and remote WA; and
Page 46 of 105
LNG export pricing and demand, which affects the domestic gas price and WA gas
producers willingness to supply the domestic market.
Over the past decade WAs growth has been driven by investment in the resources sector,
which peaked at $85 billion in 2013-14. The rate of economic growth has slowed in the past
year as international commodity markets have softened and several large resources projects
have transitioned from construction to production phases.
This section provides an overview of WAs historical and forecast economic growth, as well as
an outlook of the resources and LNG sector. It also provides an overview of the IMOs
domestic price forecasts and methodology. These economic assumptions are key inputs into
the domestic demand and supply forecasts.
3.3.1
WAs historical economic growth
Table 3.5 shows growth rates of several key economic indicators between 2009-10 and
2013-14. National gross domestic product growth is provided for comparison.
Table 3.5: Growth in key economic indicators, 2009-10 to 2013-14
2009-10
2010-11
2011-12
2012-13
2013-14
(%)
(%)
(%)
(%)
(%)
WA
State final demand
2.3
5.8
15.8
3.6
-1.8
15.8
5.9
-1.3
14.0
9.6
Gross state product
4.1
4.7
7.6
4.6
5.5
Industry gross value added
4.5
4.7
7.7
4.8
5.8
Agriculture
-6.4
-30.8
37.1
-8.2
58.6
Mining
10.2
8.50
7.3
10.5
11.2
Manufacturing
-0.7
6.8
7.4
-4.2
-3.2
Electricity, gas, water and waste

services
5.0
10.1
9.2
0.5
0.9
Construction
1.0
1.1
18.1
0.2
3.6
Services
3.2
4.9
4.4
3.6
2.3
2.0
2.3
3.7
2.5
2.5
Net exports
Australia
Gross domestic product
Source:
ABS (2014a) and ABS (2015)
In summary:
state final demand, a measure of all domestic consumption, grew at an average annual
rate of 5.7 per cent between 2009-10 and 2013-14. This was mainly associated with strong
growth in business investment in the mining sector; and
Page 47 of 105
gross state product (GSP), a measure of all state output (taking into account net exports),
grew at an average annual rate of 5.6 per cent during the same period.
3.3.2
WAs forecast economic growth
The IMO engaged NIEIR to develop projections of the WA economy. Table 3.6 shows NIEIRs
base forecast of major economic indicators for WA for 2015-16 to 2019-20.
Table 3.6: Forecast growth in key economic indicators, 2015-16 to 2019-20
2015-16
2016-17
2017-18
2018-19
2019-20
(%)
(%)
(%)
(%)
(%)
Private consumption
2.53
2.18
2.27
2.69
2.43
Private dwelling
investment
4.86
4.10
1.66
0.78
-0.73
-16.17
-8.10
-3.30
-4.49
2.47
Government consumption
2.79
3.12
2.66
2.84
2.12
Government investment
2.69
-2.49
-3.54
3.47
6.78
State final demand
-3.11
-0.52
0.74
1.01
2.43
Gross state product
2.81
3.55
3.35
2.13
2.01
Population
2.19
2.02
1.91
1.90
1.89
Unemployment
5.87
6.12
6.29
6.48
6.38
Business investment
Source:
NIEIR forecasts
In summary:
NIEIR suggests that the softening of the WA economy observed in 2014-15 will continue
into 2015-16. Economic activity will not return to levels higher than 3 per cent until
2016-17;
NIEIR expects GSP growth to remain well below the long-term average of 4.5 per cent,
driven in the short-term by falls in private business investment as several major iron ore
and natural gas projects move from construction to production; and
domestic WA consumption, as measured by state final demand, is forecast to recover over

the forecast period from the 2015-16 low of -3.1 per cent, improving to 2.4 per cent by
2019-20.
Page 48 of 105
Figure 3.4 shows actual growth in WAs GSP between 2004-05 and 2013-14, and compares
NIEIRs base GSP forecasts with WA Treasury forecasts (published in the 2015-16
State Budget).
Figure 3.4: Comparison of GSP forecasts, NIEIR and WA Treasury, 2004-05 to 2019-20
8
7
per cent
6
5
4
3
2
1
0
WA GSP
Source:
NIEIR forecast
Average GSP
(2004-05 to 2013-14)
WA treasury forecast
(2015-16 to 2018-2019)
ABS (2015), WA Department of Treasury (2015) and NIEIR
See Appendix B for NIEIRs high economic forecast scenario values.

3.3.3
Resources sector outlook
The following sections summarise the impact of the economic outlook for the iron ore, gold,
alumina and other base metals sectors on gas consumption. LNG projects are discussed in
section 3.3.4.
Page 49 of 105
3.3.3.1 Iron ore

Iron ore remains the states most valuable mineral commodity, accounting for 54 per cent of
WAs mineral and petroleum exports by value in 2014-1539, or $53.8 billion.
Iron ore prices have fallen over the past five years. As illustrated in Figure 3.5, the average
monthly price in calendar year 2015 was A$75 per tonne, a sharp fall from the high of A$163
in 2011.
Figure 3.5: Iron ore prices per dry metric tonne ($A/62 per cent iron content), January 2011 to June 2015
200
160
A$ per tonne
120
80
40
Iron Ore Price (A$ per tonne)

Source:
Average yearly prices
DMP (2015b)
The decline in price has caused iron ore producers to change focus from expansion to
productivity and cost optimisation. For example in June 2015, BHP Billiton announced the
deferral of capacity expansion at Port Hedland40, while continuing with efforts to reduce
unit costs by 25 per cent41.
While the lack of investment to support capacity growth will limit the need for new gas supplies,
productivity and cost optimisation programs may see higher cost fuel sources substituted for
gas. FMG, the third-largest producer of iron ore in Australia, has switched electricity generation
at its Solomon Hub from diesel to gas42. Rio Tinto and BHP Billiton are also reported to be
considering greater use of gas in their mining operations43.
39
40
41
42
43
DMP (2015a).
BHP Billiton (2015).
BHP Billiton (2014).
FMG (2014).
AFR (2014).
Page 50 of 105
3.3.3.2 Gold
Gold is WAs second most valuable mineral commodity, accounting for approximately
9 per cent of mineral and petroleum exports in 2014-1544. Currently, the four gold mines in WA
use natural gas to generate electricity. The Sunrise Dam and Tropicana gold mines are also
expected to use gas when the EGGP is completed (expected to be January 201645).
Without any prospect of increases in the gold price, the gold sector (similar to the iron ore
sector) is focusing on efficiency measures to remain profitable. As there are no new major gold
projects at an advanced stage of development, the IMO considers the gold sector will not make
a significant contribution to gas consumption growth in the forecast period.
3.3.3.3 Alumina
Though not a large export commodity for WA (only accounting for 5.1 per cent of mineral and
petroleum exports in 2014-1546), the production of alumina is energy intensive, making it the
largest gas-consuming sector in WA. This industry accounts for approximately one third of total
domestic gas consumption.
Production from Alcoas WA refineries Kwinana and Wagerup is expected to remain
unchanged over the forecast period, while production from Pinjarra is expected to expand from
4.2 mtpa to 5 mtpa over the forecast period47. Alcoa has indicated the majority of production
increases are related to increases in facility efficiency. As a result, the IMO does not consider
that gas consumption related to alumina production will change materially over the forecast
period.
3.3.3.4 Other base metals
Other base metals mined in WA include copper, nickel and lead. These commodities
accounted for approximately 2 per cent of WA mineral and petroleum exports in 2014-1548.
Domestic gas consumption relating to these commodities mostly occurs in nickel mines, with
the Murrin Murrin nickel-cobalt mine being the largest gas customer in this sector. While the
outlook for the base metals sector is considered in the gas demand forecasts, the IMO does
not expect it to be a key driver of gas demand during the forecast period.
3.3.4
LNG outlook
The WA domestic gas market is directly linked to the international gas market. The strength of
the international market, LNG netback prices, global demand and LNG production capacity all
influence domestic gas prices, which ultimately affect potential domestic supply.
By the end of 2025, there will be at least five LNG export facilities in WA:
Gorgon;
NWS;
44
45
46
47
48
DMP (2015a).
APA Group (2014).
DMP (2015a).
The West Australian (2015).
DMP (2015a).
Page 51 of 105
Pluto;
Prelude; and
Wheatstone.
The WA Governments domestic gas reservation policy means that some or all of these
production facilities will be required to reserve some supply for domestic consumption. Further,
the domestic gas price and competition in the LNG export market will directly impact gas
producers willingness to supply the domestic market. As a result, the outlook for the LNG
market is a key input into WAs domestic supply and demand forecasts.
3.3.4.1 LNG prices
The recent fall in oil prices has had a sharp impact on the international price of gas, particularly
in the Asia Pacific region, where most of WAs LNG is exported. Currently, more than half of
all gas contracts in the Asia Pacific region are oil price escalated49.
The rapid fall in oil prices has created an uncertain environment in the international
LNG market. Asia Pacific LNG customers are no longer willing to pay premium LNG prices
relative to other regions and are looking to negotiate flexible LNG supply contracts that are not
based on oil price escalation.
For example, Anadarko signed Asia Pacific sales contracts using a hybrid pricing model for
Mozambiques gas in 201450. Tokyo Electric Power Company (TEPCO) recently signed a
17-year LNG agreement with BP Singapore that indexes its LNG prices to Henry Hub prices51.
Spot and short-term LNG trading is also increasing, accounting for 29 per cent of
LNG contracts traded in 2014 (compared to 25 per cent in 2012).
LNG producers also face a changing LNG supply market. The United States of America (US)
is forecast to become a net exporter of LNG, with a number of new suppliers expected to come
on line at the end of 201552. These new suppliers are able to offer different LNG pricing models
(such as hub linked pricing, tolling, hybrids and others) and terms (a lack of
destination clauses53) that compete with existing LNG contracts.
3.3.4.2 LNG demand
LNG demand impacts international LNG prices, which are an input into the WA domestic gas
forecasts. LNG demand is expected to be weak over the next few years because:
South Korea and Japan, the worlds largest LNG customers, are likely to reduce
LNG consumption in the short-term as they restart their nuclear reactors to generate
electricity; and
Chinese gas market reforms between 2013 and 2015 have increased its wholesale gas
prices.
49
50
51
52
53
IGU (2015b).
Forbes (2014).
Tokyo Electric Power Company (2014).
Fuel Fix (2015).
This was outlined by Bakers at the Gastech 2015 Singapore Conference.
Page 52 of 105
However, the medium to long-term demand outlook for the Asia Pacific LNG market remains
positive. This is because:
Indonesia is expected to start importing LNG around 201854;
India is expected to increase LNG imports55;
despite switching on several of its nuclear reactors during 2015, industry experts consider
Japan will continue to use LNG56 to meet its energy requirements over the long-term;
gas demand in South East Asia continues to grow. Rapid urbanisation and economic
development through government reforms are encouraging greater use of gas in industrial
and residential sectors, and power generation57;
China has committed to reduce carbon emissions at the 2015 United Nations Climate
Change Conference in Paris58 and is likely to consider gas as a substitute for fuels such
as coal, which release more carbon;
the G7 countries have pledged to phase out the use of fossil fuels59 by the end of the
century60 and are likely to use gas as a transition fuel towards cleaner energy sources;
and
an LNG trading and transhipment hub is being developed in Singapore61.
3.3.4.3 LNG supply

The international LNG supply outlook directly impacts WA LNG producers willingness to
supply the WA domestic gas market. Though the export market remains the primary focus for
WA gas producers, low international prices and increased competition from other
LNG-exporting countries may mean the domestic market becomes more attractive.
Australia is currently the third largest LNG exporter in the world, after Qatar and Malaysia 62. In
2014, Australia supplied 23.3 mt of LNG, accounting for approximately 10 per cent of
international LNG supply. By the end of 2018, the Gorgon, Wheatstone and Prelude LNG
projects in WA will increase Australias LNG export capacity to 86.6 mtpa. Australia will have
sufficient capacity to meet 20 to 25 percent of international LNG demand63.
Despite this strong position, Australia will face intense competition from other countries
supplying LNG into the Asia Pacific market. Key competitors are:
54
55
56
57
58
59
60
61
62
63
64
Qatar while Australia is expected to surpass Qatar as the worlds largest LNG exporter
in 2018, Qatar has the capability to increase LNG supply. In June 2015, the
Qatari Government announced it had sufficient gas reserves to last for another 138 years
at current rates of gas production64;
Bloomberg (2013a).
Wood Mackenzie estimates.
Reuters (2015a).
IEA (2015b).
Whitehouse (2015).
ABC News (2015).
Natural gas is a transitional fuel in this process.
HFW (2013).
IGU (2015a), Qatar and Malaysia accounted for about 31.9 and 10.4 per cent, respectively, of international LNG exports in 2014.
Innovative Energy Consulting (2012), assuming existing LNG export capacity that has approvals remains unchanged.
Arabian Business (2015).
Page 53 of 105
US gas production in the US increased significantly between January 2014 and

May 2015. The US is likely to export these excess quantities of gas into the international
market, and is expected to switch from being a net importer to a net exporter of natural
gas by 202065;
Canada the passing of the LNG Projects Agreements Act in British Columbia (July 2015)
has reduced uncertainty and improved the prospects of LNG projects in Canada; and
Russia gas supply from Russia to the international LNG market continues to be an
unknown. Ongoing international trade sanctions and counter-sanctions have limited
normal commercial relations with the EU66. However, gas exports from Russia to China
appear unaffected, as demonstrated by commencement of the Power of Siberia gas
pipeline to China67 and the introduction of China National Petroleum Corporation as a
stakeholder in the Yamal LNG project68.
Competition from these and other countries is likely to influence the LNG export price
WA producers can achieve, thereby impacting the domestic gas price and potential gas supply.
3.3.5
Domestic gas price forecasts
A key input to the gas supply and demand forecasts is the domestic gas price. As previously
discussed, uncontracted gas supply and gas demand in the SWIS region is price-sensitive.
Therefore, the IMO produces a domestic gas forecast to test the robustness of supply and
demand projections.
The IMO considers the following variables when developing the domestic price forecasts:
future oil prices;
future LNG prices;
LNG netback prices;
projected exchange rates; and
recoverable WA gas reserves.
65
66
67
68
OCE (2015d).
This was outlined by Professor Jonathan Stern in his presentation on Russia at the Gastech 2015 conference Singapore, 28 October 2015.
Russian Times (2015).
Bloomberg (2013b).
Page 54 of 105
These scenarios represent the likely range of average medium to long-term69 contract prices
for the forecast period.
Table 3.7: Forecast gas price parameters, 2016 to 2025
Parameter
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
Base
50.8
54.4
59.1
62.3
55.6
54.3
63.9
67.5
71.5
76.6
High
53.9
63.6
68.3
72.4
67.5
66.3
75.7
81.2
83.5
87.6
Base
7.1
7.6
8.3
8.7
7.8
7.6
8.9
9.5
10.2
10.7
High
7.5
8.9
9.6
10.1
9.5
9.3
10.6
10.9
11.4
11.6
Shipping and
liquefaction
costs
(US$/MMBtu)
All
3.25
3.25
3.25
3.25
3.25
3.25
3.25
3.25
3.25
3.25
Exchange
rates (A$/US$)
All
0.72
0.71
0.73
0.71
0.66
0.63
0.63
0.65
0.66
0.66
Base
4407
4390
4350
4308
4250
4188
4120
4048
3975
3899
High
4407
4391
4355
4310
4256
4195
4119
4041
3958
3874
International
oil prices
(US$/barrel)
LNG pricesreal
(US$/MMBtu)
Recoverable
reserves (bcm)
Source:
Note:
Scenarios outlined in this table are developed by the IMO and NIEIR and do not represent any information provided
by existing market participants. International oil prices are an average of Brent, Light Sweet Crude and West Texas
Intermediate.
As shown in Table 3.7, over the forecast period, international oil prices, and consequently LNG
prices, will trend back to a long-run average from the recent historic lows. However, in 2020
and 2021, NIEIR forecasts oil prices to temporarily decrease on the basis of a supply-side
augmentation to production capacity in previous years. The supply-side augmentation is
triggered by increasing economic activity in OECD countries, which drives oil demand.
Generally speaking, oil price variability is driven by the lag between demand growth increasing
prices and new supply coming online.
69
A medium to long-term gas contract is a gas supply agreement that has a term of four years or longer.
Page 55 of 105
Figure 3.6 shows the IMOs forecast of medium to long-term average (ex-plant) new contract
gas prices for 2016 to 2025.
Figure 3.6: Forecast medium to long-term average (ex-plant) new domestic contract gas prices (real),
2016 to 2025
$10
A$ per GJ
$8
$6
$4
$2
$0
2016
2017
2018
2019
2020
Base
Source:
2021
2022
2023
2024
2025
High
In summary, the IMO considers that:
domestic gas prices will rise between 2016 and 2025 due to the expected recovery of
international oil prices and the continued weakening of the Australian dollar; and
anticipated improvement in the US economy and likely increases in US interest rates, will
increase LNG netback prices in Australian dollar terms. This should drive an increase in
domestic gas prices despite lower forecasts for Asia Pacific LNG prices.
The IMOs price forecasts are indicative only. Actual prices negotiated between any two
contracting parties are influenced by a range of commercial and competitive factors specific to
the contracting parties. It is also important to note that short-term gas contracts are not
considered in the forecasts due to the relatively small scale of the short-term market.
Page 56 of 105
Figure 3.7 compares the average new medium to long-term contract gas price projections
developed for the 2014 GSOO and this GSOO. The main driver for the sharp decrease in
forecast gas prices since the 2014 GSOO is the sharp fall in international oil prices observed
recently.
Figure 3.7: Comparison of the medium to long-term forecast contract prices (real), December 2014 and
2015 GSOOs, 2016 to 2025
$12
$10
A$ per GJ
$8
$6
$4
$2
$0
2016
2017
2018
2019
2020
Base (December 2015)

Source:
2021
2022
2023
2024
2025
Base (December 2014)
NIEIR forecasts 2015 to 2024 and 2016 to 2025
Page 57 of 105
4.
Forecasts
This chapter presents forecasts of WA domestic gas demand and supply for 2016 to 2025,
and the supply-demand balance. It includes projections of total gas demand70,
production capacity and available supply. The IMO also provides commentary on potential
opportunities for participants in the WA domestic gas market.
4.1
Domestic demand forecast
The IMO publishes two forecast demand scenarios; base and high. Only the high scenario
includes prospective gas demand. Figure 4.1 and Table 4.1 show the base and high domestic
gas demand forecasts for 2016 to 2025.
Figure 4.1: Domestic gas demand forecasts, 2016 to 2025
1,250
TJ per day
1,200
1,150
1,100
1,050
1,000
950
900
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
Base scenario (December 2014)
High scenario (December 2014)
Base scenario (December 2015)
High scenario (December 2015)
Actual
Source:
Table 4.1: Forecast gas demand (TJ per day), 2016 to 2025
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
Base
1,077
1,070
1,068
1,061
1,059
1,064
1,065
1,068
1,077
1,083
High
1,093
1,118
1,124
1,126
1,141
1,148
1,157
1,167
1,180
1,190
Source:
Domestic gas consumption is forecast to grow very slowly in both the base and high scenarios
over the forecast period (average annual growth of 0.1 per cent and 0.9 per cent respectively).
The forecasts are lower than those in the 2014 GSOO due to:
the scheduled decommissioning of the South-West Joint Venture Co-generation facility in

2016, which consumes about 30 TJ per day; and
the closure of the Windimurra vanadium mine (due to fire damage in late 2014).
70
Total gas demand is the sum of domestic demand, LNG export and LNG processing.
Page 58 of 105
However, this decrease compared to the 2014 forecasts is partially offset by the
commencement of the following projects between 2014 and 2017:
connection of the Sunrise Dam and Tropicana gold mines to the EGGP;
restart of Newman Power Station, which will supply electricity to the Roy Hill iron ore mine;
operation of the South Hedland Power Station;
operation of the Pilbara Temporary Power Station; and
expansion of the Sino Iron magnetite mine.
These changes in gas consumption result in the base scenario forecast staying relatively flat,
remaining below the 2014 forecast until towards the end of the forecast period.
The 2014 forecast included efficiency assumptions relating to the mining and minerals
processing sectors that were expected to decrease gas demand from 2017 onwards. The IMO
had assumed average gas consumption per tonne of output from key minerals projects
(such as iron ore and alumina) would decrease as a result of rising domestic gas prices. The
IMO has relaxed these efficiency assumptions in the 2015 forecast. As domestic gas prices
have fallen. As a result, despite its flat trajectory, base scenario demand is expected to exceed
the 2014 base forecast by 2022.
While the 2015 high scenario is lower than the 2014 high demand forecast, growth is expected
due to six major prospective demand projects that will likely come into operation during the
forecast period.
Page 59 of 105
4.1.1
Gas demand by area, 2016 to 2025
Forecast data indicates gas demand growth will be greater in areas that are not covered by
the SWIS than those that are connected to the SWIS. Figure 4.2 and Table 4.2 shows demand
forecasts for the base and high scenarios in the SWIS and non-SWIS.
Figure 4.2: Actual gas demand and forecasts for SWIS and non-SWIS, 2013 to 2025
800
700
TJ per day
600
500
400
300
200
100
0
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
Actual - non-SWIS
High scenario - non-SWIS
Source:
Actual - SWIS
Base scenario - SWIS
Base scenario - non-SWIS

High scenario - SWIS
Table 4.2: Domestic gas forecasts for SWIS and non-SWIS (TJ per day), 2016 to 2025
Scenario
NonSWIS
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
Base
379
382
379
377
378
383
383
382
387
389
High
389
416
426
432
448
453
458
461
468
472
Base
698
689
689
684
681
681
682
686
690
694
High
704
702
698
694
693
695
699
706
712
718
SWIS
Source:
The decrease in gas demand for the SWIS region is due to an expected decrease in gas-fired
electricity generation over the forecast period, as the move towards coal-fired and renewable
generation in the SWIS region continues.
Growth outside of the SWIS is driven by the new transmission-connected projects listed in
section 4.1. The high non-SWIS scenario includes the six prospective projects, all of which are
located outside of the SWIS region.
4.1.1.1 Opportunities in the SWIS and non-SWIS
Overall, the domestic gas demand forecasts suggest there is greater opportunity for gas
producers outside of the SWIS than in the SWIS.
Page 60 of 105
Though around two-thirds of domestic gas is consumed in the Metropolitan and South West
regions, the bulk of this consumption is driven by a handful of large industrial users (such as
Alcoas Kwinana, Wagerup and Pinjarra alumina refineries) and electricity generators
connected to the SWIS (such as the Kwinana and Cockburn power stations). Electricity
demand is not forecast to increase significantly and the current level of excess capacity in the
electricity network (1,061 MW for the 2016-17 capacity year) suggests no new gas-fired
generation capacity will be required to meet demand in the near future.
The IMO is not aware of any new large industrial projects commencing operations in the
South West and Metropolitan regions during the forecast period. If any large industrial users
do commence operation, they are likely to connect to the SWIS for their energy needs rather
than require independent gas-fired electricity generation.
Outside of the SWIS region the situation is different. Mines and industrial facilities in regional
WA tend to be located too far from the SWIS to be able to draw on any of its spare capacity.
Though there is 3,519 MW of gas-fired electricity generation located outside of the SWIS, most
of this capacity is located at remote sites and/or isolated networks. As a result, any new major
mining or processing facility would likely require its own on-site electricity generation.
In many cases, the choice of fuel type for on-site generation outside of the SWIS region is
restricted to diesel or gas. The cost of transporting coal to remote locations means it is not a
commercially viable option, while renewable generation alone is often insufficient to meet a
facilitys energy needs. As diesel is currently more expensive than gas, growth in regional WA
provides greater opportunity for gas producers.
There is also 444 MW of diesel-fuelled generation capacity outside the SWIS. Some of this
generating capacity may be converted to consume gas. In particular, the IMO expects FMGs
power stations at its Chichester Hub (including Christmas Creek and Cloudbreak mines) are
likely to convert to gas (total capacity of 88 MW).
Further diesel to gas conversions will depend on the cost of constructing pipeline infrastructure
or the availability of mobile CNG or LNG technology, as well as the cost of diesel compared to
natural gas.
Page 61 of 105
4.1.2
Total gas demand (domestic and LNG exports)
Figure 4.3 shows the base and high scenario for total gas demand for 2016 to 2025.
Total gas demand is the sum of WAs domestic gas demand and LNG export requirements
(used as feedstock and in electricity generation for the production of LNG).
Figure 4.3: Total gas demand forecasts, 2016 to 2025
5,000
4,500
4,000
PJ per annum
3,500
3,000
2,500
2,000
1,500
1,000
500
0
2016
2017
2018
2019
2020
Base Scenario
Source:
2021
2022
2023
2024
2025
High Scenario
In summary:
in the base scenario, total gas demand is forecast to grow at an average annual rate of
7.8 per cent, from 1,870 PJ per year in 2016 to 3,667 PJ per year in 2025;
in the high scenario, total gas demand is projected to grow at an annual rate of
10.1 per cent per year to about 4,454 PJ in 2025;
an increase in LNG export is driving growth in total demand. By the end of 2017, the
Gorgon LNG, Wheatstone LNG and Prelude FLNG export projects are all expected to
have commenced gas production;
the base scenario includes the planned expansion to the Gorgon LNG project from 2021;
and
the high scenario includes the base scenario assumptions, plus planned expansions to
the Wheatstone and Pluto LNG facilities by 2021. The high scenario also includes the
Bonaparte and Equus projects which are expected to commence production during the
forecast period.
Page 62 of 105
4.2
Domestic supply forecast
The domestic supply forecast has two key components: production capacity and potential
supply. The way in which gas is owned and marketed in WA means the amount of gas
production capacity does not necessarily equal total available gas supply. Factors including
the domestic gas price, LNG export demand and contractual arrangements influence potential
supply. Therefore, this section presents an overview of project production capacity, followed
by the IMOs forecast of how this translates into potential supply.
4.2.1
Projected gas production capacity
Figure 4.4 illustrates projected domestic gas production capacity for the forecast period.
Figure 4.4: Projected gas production capacity in the WA domestic gas market, 2016 to 2025
2,500
TJ per day
2,000
1,500
1,000
500
0
2016
KGP
Macedon
Dongara
2017
2018
2019
2020
2021
Varanus Island
Gorgon
Beharra Springs
2022
2023
2024
2025
Devil Creek
Wheatstone
Empire Oil and Gas
Source:
GBB standing data and various corporate websites
Note:
Start-up dates represented in this chart are Gorgon domestic Phases 1 and 2 (2016 and 2020) and Wheatstone
domestic (2018).
In summary:
domestic gas production capacity is estimated to increase from 1,659 TJ per day at the
end of 2016 to 1,977 TJ per day by the end of 202571; and
the KGP is expected to remain the largest domestic gas production facility in WA, retaining
almost one-third of the total gas production capacity at the end of 2025.
71
Potential domestic facilities such as Woodsides Pluto, Buru Energys Yulleroo and Transerv Energys Warro and other expansions are not
considered in the supply forecasts for this GSOO, due to a lack of certainty regarding completion timeframes associated with their potential
contribution to domestic gas supply.
Page 63 of 105
Although production capacity remains well above forecast demand, new domestic gas
production facilities have been proposed. The new facilities are summarised in the following
sections.
4.2.1.1 The Browse FLNG project
The Browse FLNG project has the potential to contribute to domestic gas supply shortly after
the forecast period if it attains a favourable final investment decision. On 22 June 2015, the JV
partners of this project executed the Browse FLNG Development Domestic Gas and Supply
Chain Key Principle Agreement with the WA Government72. Under this agreement, Woodside
has committed to reserve 15 per cent of the States share of LNG production from the
Torosa field (that equates to approximately 0.8 tcf of gas) for the domestic market. The IMO
understands gas will be offered to the domestic market coinciding with the commencement of
Torosas production.
There is no transmission infrastructure in place to ship gas from the Browse Basin to the
domestic market in the South West and Goldfields regions. The IMO expects any domestic
gas that is supplied from this project would be through a third party provider via the domestic
gas offset provisions allowed by the WA Government.
The IMO understands that a separate full-termed agreement (called the
Development Agreement) between the Browse JV partners, which outlines the exact domestic
reservation commitments for all parties, will be discussed after the front-end engineering and
design phase (FEED) of the project is complete. On 1 July 2015, Woodside announced the
Browse FLNG project has entered into FEED phase73 with an expected final investment
decision during the second half of 2016. Wood Mackenzie suggests the project is likely to
commence in 2028, therefore the Browse FLNG project is not included in the high scenario
supply forecast.
4.2.1.2 The Equus LNG project
The Equus project may contribute to domestic gas supply towards the end of the forecast
period. Hess, the owner of this project, has signed a non-binding letter of intent with the
NWS JV partners74. Subject to execution of binding agreements in the future, Hess intends to
use the LNG facilities at the KGP to process and liquefy gas in the Equus fields for export. As
the Equus project is subject to the WA domestic gas policy75, 15 per cent of the gas reserves
for this project must be set aside for the domestic market76.
Hess is expected to consider its final investment decision in 2017. Wood Mackenzie expects
the project to commence production in 2023.
4.2.1.3 The Pluto domestic gas facility
When the Pluto LNG project was approved for development by the WA Government in
July 2007, a confidential agreement was signed between the WA Government and the Pluto JV
partners to ensure the Pluto JV will adhere to the WA domestic gas reservation policy.
72
73
74
75
76
WA Parliament (2015).
Woodside (2015).
Hess (2014).
This was outlined in the new Subclause (4) that replaces clause 46(1A) in the principal agreement between the NWS JV and the WA
Government.
The Equus project holds permits WA-390-P and WA-474-P for the Equus project. According to Wood Mackenzie, contains approximately
2.5 tcf of gas in WA-390-P, while there is no information on WA-474-P. 15 per cent of 2.5 tcf is about 0.38 tcf.
Page 64 of 105
According to the 2010 WA Parliamentary inquiry on domestic gas, under the terms of the
agreement the Pluto JV must commence delivering gas to the domestic market within
five years of exporting LNG or after 30 million tonnes of LNG has been exported77, whichever
is earlier78.
The Pluto JV started exporting LNG in May 2012. Lead-time for environmental approvals,
construction of a domestic gas supply facility and an excess production capacity of gas
production supply suggests it is unlikely any domestic gas from the Pluto LNG project will be
available by May 2017. Instead, an excess gas supply production capacity in WA means the
IMO expects the Pluto JV will supply domestic gas through an offset arrangement with an
existing gas production facility, most likely the neighbouring KGP.
The IMO understands Woodside is in discussion with the Department of State Development.
The IMO has not received further advice on the timing of any domestic gas supply from
Pluto LNG.
4.2.1.4 Other potential gas production facilities
Table 4.3 shows other potential gas production facilities currently under consideration.
Table 4.3: New domestic gas production facilities that may be operational or upgraded by 2025
Production
facility
Operator
Basin
Existing and
proposed pipeline
connection
Is gas production capacity

contracted?
AWE
Limited
Perth
Parmelia/DBNGP
Information not publicly

available
Warro
Transerv
Energy
Perth
Parmelia/DBNGP
Conditional gas supply

agreement with Alcoa
Xyris
AWE
Limited
Perth
Parmelia/DBNGP

available
Yulleroo/
Valhalla
Buru
Energy
Canning
Proposed Great
Northern Pipeline

available
Dongara
Source:
Respective corporate websites
AWE Limited is considering expanding its Dongara facility79 and refurbishing its Xyris facility80.
Transerv Energys Warro facility and Buru Energys Yulleroo/Valhalla facility are both
greenfield projects.
While the potential facilities appear to be well supported by their respective companies, it is
unlikely any of these potential facilities will commence until commercial gas supply agreements
have been secured.
77
78
79
80
WA Parliament (2011), page 79.

Woodside (2007), page 12.
AWE Limited (2013). Resources from the Senecio gas field may be used to backfill the expanded Dongara domestic gas production facility.
AWE Limited (2015b).
Page 65 of 105
4.2.2
Potential gas supply forecast
The IMO publishes two potential supply forecast scenarios; base and high. The difference
between the base and high scenarios is driven by the average gas price assumptions for
medium to long-term domestic gas contracts.
Figure 4.5 illustrates the price-adjusted potential supply forecast for 2016 to 2025 compared
with the upper potential gas supply scenario forecast produced in the 2014 GSOO.
Figure 4.5: Potential domestic gas supply forecasts, 2016 to 2025
1,800
1,600
TJ per day
1,400
1,200
1,000
800
600
400
200
0
2016
2017
2,018
2019
2020
Base potential gas supply (2015)
2021
2022
2023
2024
2025
High potential gas supply (2015)
Upper potential gas supply (2014)

Source:
IMO 2014 and 2015 forecasts
Page 66 of 105
Table 4.4 shows the volume of potential domestic gas supply for each year of the forecast
period.
Table 4.4: Potential domestic supply forecasts (TJ per day), 2016 to 2025
Scenario
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
Base
1,201
1,251
1,175
1,262
1,187
1,231
1,306
1,356
1,431
1,486
High
1,205
1,355
1,274
1,377
1,271
1,329
1,460
1,492
1,578
1,608
Source:
Over the forecast period potential gas supply:
in the base scenario is forecast to grow on average by 2.4 per cent per annum; and
in the high scenario is forecast to grow on average by 3.3 per cent per annum.
The base and high potential supply forecasts are considerably lower than those presented in
the 2014 GSOO. This is driven by the fall in international oil prices from 2014 to 2015 (from
$110 per barrel to around $50 per barrel). The falling oil price has reduced international gas
prices by about US$4.50 per GJ, which has a flow-on effect for domestic gas prices.
The lower forecast domestic gas price means gas producers willingness to supply is likely to
be diminished. Even though production capacity is expected to increase during the forecast
period, low prices mean gas producers may consider it uneconomic to supply the domestic
market in the short-term.
However, potential gas supply is expected to increase towards the end of the forecast period
because:
the Organisation of Petroleum Exporting Countries (OPEC) expects international oil prices
to recover81 which should lead to a higher domestic gas price and a more attractive
domestic market; and
gas production capacity will increase due to the commencement of Gorgon and
Wheatstone.
81
Bloomberg (2015).
Page 67 of 105
4.3
Domestic gas market supply-demand balance
Despite the decrease in potential gas supply compared to the 2014 forecast, the domestic gas
market remains in excess supply for the forecast period. Figure 4.6 illustrates the gas market
balance for the base supply and demand scenarios from 2016 to 2025.
Figure 4.6: Gas market balance, 2016 to 2025
2,100
1,900
TJ per day
1,700
1,500
1,300
1,100
900
2016
Source:
2017
2018
2019
2020
2021
2022
2023
2024
2025
Expected gas demand range
High case potential gas supply forecast
Base case potential gas supply forecast
Total production capacity
NIEIR and IMO forecasts 2015
Page 68 of 105
5.
Gas reserves and resources
This chapter provides an overview of hydrocarbon basins in WA. It provides an estimate of

conventional and unconventional gas resources that lie within each basin, and projects how
long these resources will continue to satisfy demand.
5.1
Gas resources in WA
Approximately 92 per cent (158,373 PJ) of Australias total conventional gas resources are
located in WA and the waters around it82. WA is also estimated to hold at least 284,092 PJ83
of unconventional resources in the form of tight and shale gas.
WA has five active gas basins:
Bonaparte;
Browse;
Canning;
Carnarvon; and
Perth.
82
83
Geoscience Australia (2014), gas basins in Australia (offshore and onshore).

Ibid.
Page 69 of 105
Figure 5.1 shows the relative size and location of these WA basins and other basins in
Australia.
Figure 5.1: Australian gas basins
Source:
Geoscience Australia (2014), gas basins in Australia (offshore and onshore)
Note:
The Roebuck Basin is considered part of the Canning Basin.
The majority of conventional resources in WA lie in the Bonaparte, Browse and Carnarvon
Basins, while the majority of WAs unconventional gas resources lie in the Canning and Perth
Basins84.
84
Geoscience Australia (2014).
Page 70 of 105
5.2
Gas resources and reserves
Of WAs estimated 158,373 PJ of conventional gas resources, approximately 88,619 PJ is

categorised as 2P (proven and probable) reserves by oil and gas companies85.
There is currently no commercial production of unconventional gas in WA. The amount of WA
unconventional gas resources is unverified.
Table 5.1 summarises the current attributes of WAs active basins, and includes an estimate
of unconventional gas reserves provided by the US Energy Information Association (EIA) in
2013.
85
This is a conservative estimate that relates to the amount of gas that producers are confident they can recover. The actual volume of gas
reserves is likely to be much larger. A 2P rating means there is at least a 50 per cent confidence level that these gas reserves can be
recovered.
Page 71 of 105
Table 5.1: Attributes of WAs gas basins
Attribute
Bonaparte
Browse
Canning
Carnarvon
Perth
Supplies LNG export market*
Supplies WA domestic market*
Transmission infrastructure in place
Total area offshore, km 2 (approximate)*
250,000
140,000
76,000
535,000
122,500
Total area, onshore, km2 (approximate)*
20,000
430,000
115,000
50,000
Gas produced to date (PJ)*
1,214
18,315
725
981
17,384
Not reported
70,386
35
24,005
37,815
372
95,914
267
Estimated shale reserves (tcf)^
NA
NA
235
NA
33
Estimated tight gas reserves (tcf)+
NA
NA
14.1
NA
29.21
Conventional 2P gas reserves (PJ)*

Estimated remaining conventional resources (McKelveys EDR + SDR)
(PJ)*
Contains unconventional gas reserves
Sources: *Geoscience Australia (2014), EnergyQuest (2015) and IMO (2014b). ^ EIA (2013). + DMP (2013b), Buru Energy (2014).
Note:
Economic demonstrated resources (EDR) is a measure of the resources that are established, analytically demonstrated or assumed with reasonable certainty to be profitable for extraction
or production under defined investment assumptions (that are set by Geoscience Australia). Sub-economic demonstrated resources (SDR) are similar to EDR in terms of certainty of
occurrence but are considered to be potentially economic only in the foreseeable future.
Page 72 of 105
5.2.1
Conventional gas resources
As of December 2015, gas has only been produced from the Bonaparte, Carnarvon and
Perth basins. The Browse Basin is currently being developed by Shell and INPEX for LNG
export, while the Canning Basin is still being appraised. The WA domestic market is only
supplied with gas from the Carnarvon and Perth basins.
It is unlikely the WA domestic market will be supplied with gas from basins other than Perth
and Carnarvon in the near future. The relatively small domestic demand is already more than
adequately supplied, with the Carnarvon Basin accounting for 98 per cent of domestic supply.
Domestic gas may be supplied from the Browse Basin after the forecast period. On
3 December 2014, the WA Parliament passed the Petroleum Titles (Browse Basin) Bill 2014,
recognising new marine boundaries relating to Scott and Seringapatam reefs located the
Browse Basin. The new boundaries mean substantial portions of the hydrocarbon fields in the
Woodside-led Browse and ConocoPhilips-led Poseidon projects fall within WA waters, making
them subject to WA Government royalties and domestic gas reservation policies.
However, there is no transmission infrastructure in place to ship gas from the Browse Basin to
the domestic market in the South West and Goldfields regions. The Browse JV partners will
likely provide gas through a third party provider via the domestic gas offset provisions allowed
by the WA Government.
There is also no gas infrastructure in place to transport gas from the Canning and
Bonaparte basins to the South West and Goldfields. The vast distances involved means the
cost of building the necessary infrastructure is prohibitive.
Page 73 of 105
5.2.1.1 Exploration
Between 1990 and September 2015 a total of 2,579 hydrocarbon wells were drilled in WA
(shown in Figure 5.2), of which around 63 per cent were in the Carnarvon Basin.
Figure 5.2: Number of exploration wells drilled, 1990 to 2015
200
180
Number of wells drilled
160
140
120
100
80
60
40
20
0
Carnarvon
Browse
Canning
Bonaparte
Perth
Source:
Compiled using APPEA (2014b) and National Offshore Petroleum Titles Administrator (2015)
Note:
The same well may be counted twice if it is redrilled.
The number of wells being drilled has fallen in recent years compared to the peaks in 2007 to
2009. Cost is likely a factor in this reduction, as the total cost of drilling offshore wells has
increased five-fold in Australia since 200386. EnergyQuest87 estimates the average cost of
offshore exploration in WA is US$90 million per well, although other sources report higher
figures88. Rising costs can be attributed to exploration moving further offshore, with wells
located in deeper water.
5.2.2
Unconventional gas resources
Unconventional gas (shale and tight gas) reserves in WA remain largely unverified, with only
the Perth and Canning basins having been appraised to any significant extent. However, it is
widely accepted that WA has substantial unconventional gas reserves.
The EIA estimates there are 268 tcf of recoverable shale gas resources within the onshore
Canning and Perth Basins, almost twice the amount of WAs conventional gas resources89. A
2013 Australian Council of Learned Academies report90 provides a higher estimate (475 tcf),
again with the majority located in the Canning Basin.
86
87
88
89
90
APPEA (2014a).
EnergyQuest (2014).
Thomson Reuters Zaywa (2014) reports up to US$170 million.
EIA (2013).
ACOLA (2015).
Page 74 of 105
Geoscience Australia estimates there are approximately 22,052 PJ (20 tcf) of tight gas
reserves in Australia. Department of Mines and Petroleum (DMP) considers WA has the
majority of this volume, with most of WAs tight gas reserves located in the Perth Basin. DMP
estimates the Perth Basin contains approximately 12 tcf of tight gas. However, an estimate
based on public announcements from a sample of WA tight gas explorers suggest tight gas
reserves in WA may be as high as 29 tcf.
5.2.2.1 Exploration
Currently, all shale and tight gas exploration activities in WA are confined to onshore
exploration91. Exploration activities in each basin are summarised below.
Bonaparte Basin Advent Energy is known to be exploring for shale resources at its
Waggon Creek field92.
Canning Basin Several exploration companies, JV partners and/or JV interests have

permits in the Canning Basin. Buru Energy and New Standard Energy are drilling in the
Canning Basin with their respective JV partners (Mitsubishi Corporation and
Quadrant Energy with Buru, ConocoPhilips and PetroChina with New Standard).
Carnarvon Basin Rusa Resources and Tap Oil are exploring for shale resources in two
special prospecting license areas covering a total of 38,000 square km93.
Perth Basin A number of companies are exploring for shale and/or tight gas.
AWE Limited and Transerv Energy have made the most progress in the Perth Basin, as
they have been drilling and testing the gas flows of their various exploration projects94.
91
92
93
94
DMP (2014).
DMP (2013a).
According to Tap Oils corporate website, it has entered into a binding agreement with Rusa Resources to farm into Rusas special
prospective areas.
AWE Limited (2013) and Transerv Energy (2012).
Page 75 of 105
5.2.3
Remaining resources and reserves
Based on the total estimates of conventional and unconventional resources, Figure 5.3 shows
how long WAs resources are expected to last at the current and projected rate of domestic
gas and LNG sales.
Figure 5.3: Estimated WA resources and reserves, 2014
500,000
100
12
400,000
80
350,000
70
300,000
PJ
90
60
284,080
250,000
50
442,465
200,000
150,000
40
30
58,645
100,000
50,000
20
10,942
450,000
10
88,619
0
2P reserves
McKelvey's
EDR
McKelvey's
SDR
EIA shale
Tight gas
resources
estimates
(2013)
(official)
Total
Source:
EnergyQuest (2015), Geoscience Australia (2014), DMP (2013b) and DMP (2014)
Note:
McKelvey provides two estimates of reserves. Economic demonstrated resources (EDR) is a measure of the
resources that are established, analytically demonstrated or assumed with reasonable certainty to be profitable for
extraction or production under defined investment assumptions that are set by Geoscience Australia. Sub-economic
demonstrated resources (SDR) are similar to EDR in terms of certainty of occurrence but are considered to be
potentially economic only in the foreseeable future.
In summary:
based on the 2P assessments and McKelveys assessment of economic resources,

conventional gas reserves will last approximately 19 to 22 years from 2025 (to 2047);
if improvements in technology, reduction in production costs and higher gas prices allow
resources that are currently uneconomic to be developed in the future, there may be
sufficient conventional resources in WA to last until 2060; and
if unconventional gas is also taken into account, WAs resources may be expected to last
up to 99 years beyond 2025.
It should be noted that the estimates of conventional gas reserves are based on official
2P assessments, which are typically conservative. The Chevron-led Gorgon and Wheatstone
LNG projects, both of which are in the Carnarvon Basin, are expected to commence production
within the next two years. Each project has an expected operating life of around 30 years,
which takes these conventional reserves beyond 2045.
Page 76 of 105
5.2.3.1 Estimated reserves by domestic production facility

Figure 5.4 shows the estimated gas reserves supporting WAs major domestic gas production
facilities for the forecast period.
Figure 5.4: Estimated gas reserves linked to domestic production facilities, August 2015
16,000
14,206
2P reserves (PJ)
12,000
8,000
4,000
389
57.7
17.8
496
16
-4,000
12
-8,000
-12,000
-16,000
0
Karratha Gas
Plant
Varanus
Island
Estimated 2P reserves (PJ)

Source:
Devil Creek Dongara and

Beharra
Springs
Red Gully
Implied years remaining
1,114
Macedon
Years remaining (implied) based on 2015 average production
Estimates based on EnergyQuest (2015) and AWE Limited (2015a)
Only the production facilities located in the Perth Basin (Dongara, Beharra Springs and
Red Gully) appear to have insufficient gas reserves to maintain current production levels until
2025. While supply from any of these three facilities may cease prior to the end of 2025, any
disruption to domestic gas supply would be minimal as their contribution to the domestic market
is small and can be replaced by other providers spare production capacity.
Page 77 of 105
6.
Other issues
This chapter summarises the most pertinent other issues that are likely to impact the
domestic gas industry in the medium to long-term.
6.1
WA Government Electricity Market Review
In March 2014, the Minister for Energy launched the WA Governments Electricity Market
Review (EMR)95. Although the EMR is mostly focused on the Wholesale Electricity Market, its
proposal to introduce full contestability to the retail electricity market will also affect the
retail gas market.
There are currently two retailers (Alinta Energy and Kleenheat) that supply gas to residential
and small-use commercial customers via the gas distribution network. When full retail
contestability is introduced to the electricity market, it is likely to attract new retailers to the
electricity sector. These retailers may also enter the retail gas market. The WA Government
intends to introduce full retail contestability to the retail electricity market by mid-2018.
The EMR also proposes to transition some gas and electricity economic regulatory functions
from the WA-based ERA to the national Australian Energy Regulator (AER)96. A draft timeline
published by the Public Utilities Office suggests legislative amendments to the regulatory
framework will be made in September 2016 to apply from 1 July 2018.
As gas transmission and distribution infrastructure in WA is already regulated under the
National Gas Law, the regulatory mechanism will not change. However, the transfer of
functions may impact the timing of when future regulatory reviews are performed, which can
impact the timing of investment decisions by regulated entities.
6.2
Wholesale gas price indices
6.2.1
Australian index
As part of the Commonwealth Governments Domestic Gas Strategy97, the Australian Energy
Market Commission (AEMC) is working with the ABS and the gas industry to establish a
wholesale gas price index to measure average price movements in bilateral gas contracts. The
price index follows the gas market development plan98 endorsed by all State and Territory
Energy Ministers at the Council of Australian Governments on 23 July 2015 in Perth99.
The AEMC considers a wholesale gas price index for the whole of Australia will enable the
development of:
a robust and credible spot market reference price;
a forward derivative curve;
95
96
97
98
99
See the website of the Public Utilities Office for more information on the EMR.
Department of Finance (2015).
Department of Industry and Science (2015).
COAG (2015a).
COAG (2015b).
Page 78 of 105
a measure of movements in bilateral contracts; and
cost of production and LNG netback estimates.
This data can then be used to:
measure the trend in wholesale gas prices in the Australian economy;
increase transparency around pricing structures in bilateral gas contracts; and
as a price escalation factor in wholesale gas contracts.
On 14 September 2015100, the AEMC and the ABS outlined the purpose of the index and how
they intend to proceed with its development. The AEMC and ABS said they intend to establish
an Australian (including WA/NT) and eastern Australian (excluding WA/NT) index due to the
different supply and demand fundamentals of each market. This will be done by surveying
large gas users operating in each state.
Prices would be weighted according to a methodology to be developed by the ABS. Data would
be collected and the index published quarterly (lagged by approximately one month) in line
with the existing Producer Price Index.
The IMO expects the index to be made up of a basket of gas contracts with different pricing
structures. The index will allow users to measure the direction and magnitude of movements
in wholesale prices across a sample of bilateral gas contracts. The AEMC has indicated it will
return to WA to consult market participants further.
6.2.2
Asia Pacific index
There are currently moves to establish an LNG pricing index in the Asia Pacific region. For
example, Singapore unveiled its LNG price index on 11 June 2015 (see section 6.4.1).
While the Asia Pacific hub will not be directly linked to an Australian domestic price hub, it will
provide greater transparency of spot trading and provide valuable data to help calibrate
domestic prices and improve the quality of LNG netback estimates.
100
Representatives from the AEMC and ABS held a presentation to WA stakeholders at the IMOs offices.
Page 79 of 105
6.3
Domestic LNG and CNG
Domestic LNG and CNG consumption is a growing subsection of WAs wholesale gas market.
There are now two domestic LNG facilities and one CNG facility operating in WA, with a further
LNG facility proposed in Port Hedland (see Table 6.1).
Table 6.1: Current and potential domestic LNG and CNG facilities
Owner and
Operator
Location
Facility Type
Gas production
capacity
(estimates) TJ
per day
Status
EVOL
(Wesfarmers)
Kwinana
LNG
~9.7
Operational
Maitland
(Karratha)
LNG
~11.1
Operational
Sub161
Port Hedland
CNG
~12.5
Operational
Mobile LNG
Port Hedland
LNG
~6
Proposed
EDL
Source:
Respective corporate websites and IMO estimates
Domestic LNG and CNG facilities allow natural gas to service areas of WA that are not
connected to the gas pipeline network. The current facilities are primarily being used to supply
remote power generation facilities and LNG-fuelled transport. For example, EDLs Maitland
facility supplies domestic LNG to the West Kimberley Power Project for remote generation
sites, and EVOL LNG supplies several remote power generation sites in the Goldfields101.
101
EVOL LNG (2015).
Page 80 of 105
Average utilisation for the EDL and EVOL facilities is approximately 75 per cent102. This
suggests there is spare capacity at these facilities, which may be utilised by companies
considering switching from diesel to gas. Figure 6.1 compares the prices of diesel and LNG
net of GST and excise from January 2014 to August 2015. The average difference between
diesel and LNG prices was $8.38 per GJ. Depending on project life, LNG transport costs, and
the capital cost of switching, significant savings are possible if a diesel operated facility
switches to LNG.
Figure 6.1: Diesel and LNG netback prices, January 2014 to August 2015
30
25
A$ per GJ
20
15
10
5
0
Diesel price ex. GST and excise
LNG netback price ex. GST and excise
Source:
Argus Media (2015) and Australian Institute of Petroleum (2015)
Note:
Prices do not include transport costs.
The consistently lower price per GJ of LNG relative to diesel in WA will be attractive to potential
customers who cannot economically connect to existing or upcoming pipeline infrastructure.
102
GBB data.
Page 81 of 105
6.4
Other developments in the LNG market
6.4.1
The potential rise of an Asia Pacific LNG trading hub
Spot and short-term LNG trading continues to increase as a proportion of total LNG exports
internationally (see Figure 6.2). This means establishing a pricing reference for short-term
trading in each region is important.
Figure 6.2: Type of LNG contracts traded, 2012 to 2014
100%
90%
25%
27%
29%
75%
73%
71%
2012
2013
2014
80%
70%
60%
50%
40%
30%
20%
10%
0%
Long-term
Spot/short-term
Source: GIIGNL (2013 to 2015)
North America and Europe have already established pricing references through existing
trading hubs, such as the Henry Hub in the US, National Balancing Point in the
United Kingdom, Zeebrugge hub, Central European Trading hub and the Title Transfer Facility
in Europe. Currently, there is no price reference for LNG in the Asia Pacific region (other than
the international oil price).
China, Singapore and Japan are vying to become the authoritative trading and pricing hub for
the entire Asia Pacific region:
Japan was the first to develop LNG trading in the Asia Pacific region, allowing trade of
non-deliverable forward products103 on the Japan OTC Exchange in September 2014;
Singapore unveiled its LNG price index in June 2015, called the Free on Board Singapore
SGX LNG Index Group; and
China commenced trading natural gas through its Shanghai Petroleum and Natural Gas
Exchange104 in July 2015.
While it is unclear which of these proposed hubs will develop into the definitive pricing
reference for the Asia Pacific, Singapore potentially has the strongest case.
103
104
A non-deliverable forward is a type of futures contract that is settled financially without any physical exchange.
Reuters (2015b).
Page 82 of 105
Singapore possesses LNG, fuel bunkering105, oil and gas trading and shipping expertise,
strong legal frameworks, an efficient port, independence (not a significant buyer or seller),
large multi-user LNG storage facility that can accept multiple LNG carriers and has close
economic relationship with the majority of LNG selling and purchasing countries106.
Singapore also possesses political stability and unique geography. Several international oil
and gas companies have located their LNG and oil marketing and/or shipping divisions in
Singapore. In addition, Singapore has potential to support LNG redistribution in the
South East Asian region, another area expected to be short of gas supply over the forecast
period107.
6.4.2
Potential displacement of Australian LNG production
OCE reports WA has some of the highest long-run marginal costs of gas production and
liquefaction when compared to a sample of LNG export locations in the US, East Africa and
Asia Pacific108. As a high cost producer of LNG109, WA faces the highest risk of displacement
in the LNG supply chain when several long-term LNG export contracts start to expire from
2016.
Reports from Accenture110 and Oxford University111 also highlight that Australias ability to
compete internationally may be severely undermined by high operating costs. This is despite
Australias advantages in terms of geographic location, gas reserves and domestic expertise
for LNG. However, the reports suggest brownfield developments remain economically viable.
The high cost of LNG production in Australia was recently supported by estimates calculated
by Carbon Tracker112. The report estimates all prospective Australian LNG projects require
LNG international prices to be higher than US$12 to US$16 per MMBtu.
6.4.3
Availability of unconventional gas to international gas supply
The availability of unconventional gas to the international gas market has the potential to
significantly influence the availability of gas and LNG. Currently, only Australia and the US
have successfully developed unconventional gas for their domestic and export markets which
may be replicated in other countries.
In addition, low oil prices have impacted the exploration budgets of the oil and gas industry,
leading to greater consideration.
105
106
107
108
109
110
111
112
Singapore is already the largest fuel bunkering location internationally and already commands 17 per cent of the total bunkering market
share in 2010.
See Tan, J (2015) for other reasons on why Singapore is likely to succeed.
IEA (2015a).
OCE (2015d).
Macquarie Equity Research (2012), Credit Suisse Global Equity Research (2012), Deloitte (2013) and McKinsey (2013) also provide a
breakdown of cost estimates for LNG projects in Australia.
Accenture (2015).
Oxford University (2014).
Carbon Tracker (2015).
Page 83 of 105
Appendix A. Abbreviations
2P proven and probable
A$ Australian dollar
ABS Australian Bureau of Statistics
ACCC Australian Competition and Consumer Commission
ACOLA Australian Council of Learned Academies
AEMC Australian Energy Market Commission
AER Australian Energy Regulator
AFR Australian Financial Review
APPEA Australian Petroleum Production and Exploration Association
bcm billion cubic metres
CCIWA Chamber of Commerce and Industry Western Australia
CNG compressed natural gas
COAG Council of Australian Governments
CSG coal seam gas
DAE Deloitte Access Economics
DBNGP Dampier to Bunbury Natural Gas Pipeline
DBNGP Transmission DBNGP (WA) Transmission Pty Ltd
DMP Department of Mines and Petroleum
DSD Department of State Development
EDR economic demonstrated resources
EGGP Eastern Goldfields Gas Pipeline
EIA (United States) Energy Information Administration
EMR Electricity Market Review
ERA Economic Regulation Authority of WA
F&D finding and developing
FLNG floating liquefied natural gas
FMG Fortescue Metals Group
FRGP Fortescue River Gas Pipeline
Page 84 of 105
GAB Gas Advisory Board

GBB Gas Bulletin Board
GDP gross domestic product
GGP Goldfields Gas Pipeline
GIIGNL International Group of Liquefied Natural Gas Importers
GJ gigajoule
GSI Gas Services Information
GSOO Gas Statement of Opportunities
GSP gross state product
GWh gigawatt hour
IEA International Energy Agency
IGU International Gas Union
IMO Independent Market Operator
IPJV Incremental Pipeline JV
KGP Karratha Gas Plant
JV joint venture
LNG liquefied natural gas
LPG liquefied petroleum gas
MGSF Mondarra Gas Storage Facility
MMbtu million British thermal units
mt million tonnes
mtpa million tonnes per annum
MW megawatt
NIEIR National Institute of Economic and Industry Research
NSW New South Wales
NT Northern Territory
NWS North West Shelf
OCE Office of the Chief Economist
OPEC Organization of the Petroleum Exporting Countries
Page 85 of 105
PC Productivity Commission
PEP Pilbara Energy Pipeline
PJ petajoule
Q quarter
Qld Queensland
SA South Australia
SDR sub-economic demonstrated resources
SWIS South West Interconnected System
Tas Tasmania
TEPCO Tokyo Electric Power Company
tcf trillion cubic feet
TJ terajoule
US United States
US$ US dollar
Vic Victoria
WA Western Australia
WA Treasury WA Department of Treasury
WEM Wholesale Electricity Market
Page 86 of 105
Appendix B. Forecasts of economic growth

Table B.1: Growth in Australian gross domestic product (per cent per year)
Year
Actual
Base
2006-07
3.8
2007-08
3.7
2008-09
1.7
2009-10
2.0
2010-11
2.2
2011-12
3.6
2012-13
2.7
2013-14
2.5
2014-15
2.3
High
2015-16
2.4
3.3
2016-17
3.0
3.8
2017-18
3.3
4.0
2018-19
2.4
3.4
2019-20
1.6
2.4
2020-21
2.4
3.1
2021-22
2.7
3.5
2022-23
2.8
3.6
2023-24
2.7
3.6
2024-25
2.6
3.6
2025-26
2.7
3.4
Average growth
2.6
3.4
Source: NIEIR forecasts 2016 to 2025
Page 87 of 105
Table B.2: Growth in WA gross state product (per cent per year)
Year
Actual
Base
2006-07
6.2
2007-08
4.1
2008-09
4.3
2009-10
4.1
2010-11
4.7
2011-12
7.7
2012-13
4.6
2013-14
5.5
2014-15
1.7
High
2015-16
2.8
3.8
2016-17
3.6
4.6
2017-18
3.4
4.0
2018-19
2.1
3.0
2019-20
2.0
3.0
2020-21
2.7
3.7
2021-22
3.0
3.9
2022-23
3.0
3.9
2023-24
2.9
4.0
2024-25
3.4
4.4
2025-26
3.2
4.1
Average growth
2.9
3.9
Page 88 of 105
Appendix C. Facilities included in potential supply, 2016 to 2025

Table C.1: Production facilities included in potential supply forecasts
Production
facility
Operator/
expected
operator
Basin
Estimated
gas
production
capacity (TJ
per day)
Estimated
start-up
Karratha Gas
Plant (NWS)
NWS JVs
Carnarvon
630
NA
Varanus
Island East
Spar
Quadrant
Energy
Carnarvon
270
NA
Varanus
Island
Harriet
Quadrant
Energy
Carnarvon
120
NA
Devil Creek
Quadrant
Energy
Carnarvon
220
NA
Macedon
BHP Billiton
Carnarvon
200
NA
Gorgon
Domestic
Chevron
Carnarvon
300
early 2016
(182 TJ per
day)
Wheatstone
Domestic
Chevron
Carnarvon
200
2018
Dongara
AWE Limited
Perth
NA
Beharra
Springs
Origin Energy
Perth
19.6
NA
Red Gully
Empire Oil
and Gas
Perth
10
NA
Total gas
production
capacity
Comments
Capacity is
anticipated to be
182 TJ per day
until 2020
Facility may be
expanded due with
the
commercialisation
of Senecio fields.
Facility has
provisions to
expand capacity to
approximately 20
TJ/day
1976.6 TJ per
day by the
end of 2025
Source: Public announcements and respective corporate websites
Page 89 of 105
Appendix D. Medium to long-term average (ex-plant) new gas

contract price forecasts
Table D.1: Average medium to long-term gas price forecasts (ex-plant) (real, $ per GJ)
Year
Base
High
2016
$5.68
$5.77
2017
$6.60
$7.95
2018
$6.02
$6.94
2019
$6.67
$7.91
2020
$5.98
$6.70
2021
$6.10
$6.95
2022
$7.06
$8.77
2023
$7.60
$9.14
2024
$8.57
$10.30
2025
$9.43
$10.75
Page 90 of 105
Appendix E. LNG requirement forecasts, 2016 to 2025

Table E.1: LNG feedstock estimates (PJ per year)
Year
Base
High
2016
1,367
1,367
2017
2,064
2,064
2018
2,591
2,591
2019
2,640
2,640
2020
2,640
2,688
2021
2,781
3,194
2022
2,922
3,506
2023
2,922
3,560
2024
2,922
3,615
2025
3,029
3,722
Source: IMO forecasts 2016 to 2025

Table E.2: LNG processing estimates (8 per cent of feedstock) (PJ per year)
Year
Base
High
2016
109
109
2017
165
165
2018
207
207
2019
211
211
2020
211
215
2021
222
255
2022
234
280
2023
234
285
2024
234
289
2025
242
298
Page 91 of 105
Table E.3: Total LNG requirement estimates (PJ per year)
Year
Base
High
2016
1,477
1,477
2017
2,229
2,229
2018
2,798
2,798
2019
2,851
2,851
2020
2,851
2,903
2021
3,003
3,449
2022
3,156
3,786
2023
3,156
3,845
2024
3,156
3,904
2025
3,272
4,020
Page 92 of 105
Appendix F. Conversion factors

The following conversion factors have been applied when preparing this GSOO.
Table F.1: Conversion factors
To
Natural
gas and
LNG
Billion
cubic
meters
NG
Billion
cubic
feet
NG
Million
tonnes of
oil
equivalent
From
Million
tonnes
LNG
Trillion
British
thermal
units
Million
barrels oil
equivalent
Petajoule
Multiply by
Billion
cubic
meters NG
35.3
0.9
0.74
35.7
6.6
37.45
Billion
cubic feet
NG
0.028
0.025
0.0216
1.01
0.19
1.06
Million
tonnes oil
equivalent
1.11
39.2
0.82
39.7
7.33
Million
tonnes
LNG
1.36
48
1.22
48.6
8.97
55.43
Trillion
British
thermal
units
0.028
0.99
0.025
0.021
0.18
1.06
Million
barrels oil
equivalent
0.15
5.35
0.14
0.11
5.41
5.82
Petajoule
0.027
0.943
0.018
0.943
0.172
Note:
NG is natural gas.
Page 93 of 105
Appendix G. References
ABC News (2015), G7 meeting: World leaders pledge to act on climate change, phase out
fossil fuels by end of century. Accessed 31 July 2015.
http://www.abc.net.au/news/2015-06-09/g7-leaders-pledge-to-phase-out-fossil-duels-by-endof-century/6530838
ABS (2014a), 5220.0 - Australian National Accounts: State Accounts, 2013-14. Accessed
19 August 2015.
http://abs.gov.au/AUSSTATS/abs@.nsf/allprimarymainfeatures/E6765105B38FFFC6CA2568
A9001393ED?opendocument
ABS (2014b), Environmental Issues Energy Use and Conservation, catalogue number
4602.0.55.001. Accessed 13 September 2015.
http://abs.gov.au/AUSSTATS/abs@.nsf/allprimarymainfeatures/A38DDA7F40718E43CA257
50E00112A97?opendocument
ABS (2015), 5206.0 - Australian National Accounts: National Income, Expenditure and
Product, Jun 2015. Accessed 1 October 2015.
http://abs.gov.au/ausstats/abs@.nsf/mf/5206.0/
Accenture (2015), Ready or Not? Creating a world-leading oil and gas industry in Australia.
Accessed 25 November 2015.
https://www.accenture.com/us-en/_acnmedia/Accenture/ConversionAssets/DotCom/Documents/Global/PDF/Dualpub_14/Accenture-Australia-LNG-Report.pdf
ACOLA (2015), Securing Australias Future Engineering energy: unconventional gas
production. Accessed 21 September 2015.
http://www.acola.org.au/index.php/projects/securing-australia-s-future/project-6
AER (2007), Australian Energy Regulator State of the Energy Market 2007. Accessed
25 November 2015.
https://www.aer.gov.au/publications/state-of-the-energy-market-reports/state-of-the-energymarket-2007
25 November 2015.
25 November 2015.
25 November 2015.
Page 94 of 105
25 November 2015.
25 November 2015.
25 November 2015.
25 November 2015.
AFR (2014), Australian Financial Review BHP, Rio look at switching to gas,
16 October 2014.
APA Group (2014), APA to develop a new pipeline in the Goldfields region of Western
Australia. Accessed 10 September 2015.
http://www.apa.com.au/investor-centre/news/asxmedia-releases/2014/apa-to-develop-a-newpipeline-in-the-goldfields-region-of-western-australia.aspx
APA Group (2015), Goldfields Gas Pipeline Spare Capacity Register. Accessed
26 November 2015.
http://www.apa.com.au/media/241285/ggp%20capacity%20register%20-%20jul15.pdf
APPEA (2014a), New analysis shows rising cost of petroleum exploration. Accessed
12 November 2014.
http://www.appea.com.au/media_release/new-analysis-shows-rising-cost-of-petroleumexploration/
APPEA (2014b), Quarterly Drilling Statistics (1990 to 2014). Accessed 25 November 2014.
http://www.appea.com.au/?attachment_id=5199
Arabian Business (2015), Qatar has gas reserves to last 138 years, says QNB. Accessed
25 November 2015.
http://www.arabianbusiness.com/qatar-has-gas-reserves-last-138-years-says-qnb596912.html
Argus Media (2014), Gorgon Expansion Output of Offer, Global LNG, Volume X, Issues 4
April 2014.
Argus Media (2015), Argus Australia LNG FOB index.
ATCO (2012), Gas distribution maps. Accessed 2 September 2015.
http://www.atcogas.com.au/About-Us/Coverage-Maps
Page 95 of 105
Australian Competition and Consumer Commission (2009), ACCC allows joint marketing of
natural gas from the Gorgon Gas Project. Accessed 15 September 2015.
https://www.accc.gov.au/media-release/accc-allows-joint-marketing-of-natural-gas-from-thegorgon-gas-project
Australian Institute of Petroleum (2015), Terminal Gate Prices. Accessed
21 September 2015.
http://www.aip.com.au/pricing/tgp/
Australian Mining (2014a), Exxon and BHP gain approval for Scarborough floating LNG.
http://www.australianmining.com.au/news/exxon-and-bhp-gain-approval-for-scarboroughfloati
Australian Mining (2014b), Chevron pours cold water on Gorgon expansion. Accessed
15 July 2015.
http://www.australianmining.com.au/news/chevron-pours-cold-water-on-gorgon-expansion
AWE Limited (2013), Senecio feasibility study underway, ASX announcement, 6 February
2013. Accessed 22 December 2014.
http://www.awexplore.com/IRM/Company/ShowPage.aspx/PDFs/277967683348/Seneciofeasibilitystudyunderway
AWE Limited (2015a), 2015 Annual report. Accessed 25 November 2015.
http://www.awexplore.com/IRM/PDF/3637/AWEs2015AnnualReport
AWE Limited (2015b), Gas supply and demand in Western Australia in Energy in WA
Conference Perth. Accessed 27 July 2015.
http://www.awexplore.com/IRM/Company/ShowPage.aspx/PDFs/361134861337/AWEsEnergyinWAConferencePresentation
BHP Billiton (2014), Iron Ore Briefing and Western Australia Iron Ore Site Tour. Accessed
5 July 2015.
http://www.bhpbilliton.com/investors/news/iron-ore-briefing-and-western-australia-iron-oresite-tour
BHP Billiton (2015), Iron Ore fundamentals. Accessed 6 September 2015.
http://www.bhpbilliton.com/investors/reports/iron-ore-fundamentals
Bloomberg (2013a), Indonesia to Import LNG by 2018 as Demand Rises, Migas Says.
http://www.bloomberg.com/news/articles/2013-03-06/indonesia-to-import-lng-by-2018-asdemand-rises-regulator-says
Bloomberg (2013b), CNPC Buys Stake in Novateks Yamal LNG Project in Russian Arctic.
Accessed 7 August 2015.
http://www.bloomberg.com/news/articles/2013-09-05/cnpc-buys-stake-in-novatek-s-yamallng-project-in-russian-arctic
Page 96 of 105
Bloomberg (2015), OPEC assumes oil prices will recover gradually to $80 in 2020. Accessed
17 September 2015.
http://www.bloomberg.com/news/articles/2015-09-17/opec-sees-crude-rising-to-80-by-2020as-rival-suppliers-falter
Buru Energy (2014), Corporate update: delivering Western Australias energy future.
http://www.buruenergy.com/wp-content/uploads/48.Updated-Corporate-Presentation.pdf
CarbonTracker (2015), Carbon Supply Cost Curves: Evaluating Financial Risk to Natural
Gas Capital Expenditure. Accessed 7 October 2015.
http://www.carbontracker.org/wp-content/uploads/2015/07/CTI-gas-report-Final-WEB.pdf
COAG (2015a), Gas Market Development. Accessed 25 November 2015.
http://www.scer.gov.au/workstreams/energy-market-reform/gas-market-development/
COAG (2015b), Meeting Communique. Accessed 25 November 2015.
https://scer.govspace.gov.au/files/2015/08/Energy-Council-Communique-23-July-2015FINAL.pdf
Credit Suisse Global Equity Research (2012), Global LNG Sector Update 7, June 2012.
Accessed 18 December 2014.
https://research-andanalytics.csfb.com/docView?language=ENG&format=PDF&document_id=977153251&sourc
e_id=em&serialid=lLnIHOuVvGf%2BeB6YKN9IA%2Bot%2FumB3JhDoxYEUUEK08s%3D
DBNGP Transmission (2015), DBNGP Capacity Register. Accessed 7 September 2015.
http://www.dbp.net.au/wp-content/uploads/2015/05/20150527-DBNGP-Capacity-Register.pdf
Deloitte (2013), Oil and Gas Reality Check 2013. Accessed 26 November 2015.
http://www2.deloitte.com/content/dam/Deloitte/global/Documents/dttl-eroilgasrealitycheck2013-08072013.pdf
Department of Finance (2015), Transfer of Regulatory Functions Project. Accessed
21 September 2015.
http://www.finance.wa.gov.au/cms/Public_Utilities_Office/Electricity_Market_Review/Transfer
_of_Regulatory_Functions.aspx
Department of Industry and Science (2015), Domestic Gas Strategy - Australian Government
Policy and Actions. Accessed 25 November 2015.
http://www.industry.gov.au/Energy/EnergyMarkets/Documents/Domestic-Gas-Strategy.pdf
DMP (2013a), Western Australia Mineral and Petroleum Statistics Digest 2011-12. Accessed
26 November 2015.
http://www.dmp.wa.gov.au/Documents/About-Us-Careers/AboutUs-StatisticsDigest_201112.pdf
DMP (2013b), Onshore petroleum successes. Accessed 26 November 2015.
http://www.dmp.wa.gov.au/Documents/Petroleum/PD-RES-PUB-133D.pdf
Page 97 of 105
DMP (2014), Natural gas from shale and tight rocks fact sheet. Accessed 26 November
2015.
http://www.dmp.wa.gov.au/Documents/Petroleum/Petroleum-Hydraulic-Fracture-Stimulation0002.pdf
DMP (2015a), Department of Mines and Petroleum Latest Statistical Release, Pre-release
2015. Accessed 26 November 2015.
http://www.dmp.wa.gov.au/About-Us-Careers/Latest-Statistics-Release-4081.aspx
DMP (2015b), Department of Mines and Petroleum, Quantity and value of minerals and
petroleum. Accessed 26 November 2015.
http://www.dmp.wa.gov.au/Departmental-Publications-3840.aspx
DMP (2015c), Department of Mines and Petroleum, Major resource projects 2015. Accessed
26 November 2015.
http://geodocs.dmp.wa.gov.au/viewer/viewerComponentAction.do?documentId=503160&vie
wMarkId=0&ct=true&at=none&btv=true&atv=false&vmtv=false&ac=ff0000&cabinetId=2600&
pg=0&scl=6&bds=0|0|16384|27306
DUET Group (2015), Management Information Report, Accessed 7 September 2015.
http://www.duet.net.au/Investor-centre/Investor-reports/Tabs/Management-informationreports/2015/FY2015-Management-Information-Report.aspx
EIA (2013), Technically Recoverable Shale Oil and Shale as Resources: An Assessment of
137 Shale Formations in 41 Countries Outside the United States. Accessed
18 December 2014.
https://www.eia.gov/analysis/studies/worldshalegas/archive/2013/pdf/fullreport_2013.pdf
EnergyQuest (2014), Oil and Gas Industry Cost Trends. Accessed 18 December 2014.
http://www.appea.com.au/wp-content/uploads/2014/11/APPEA-Cost-Report_Final.pdf
EnergyQuest (2015), Energy Quarterly, August 2015.
ERA (2014), 2014 Annual Performance Report Energy Distributors, December 2014.
https://www.erawa.com.au/cproot/13092/2/20141218%20FINAL%20%202014%20Annual%20Performance%20Report%20-%20Energy%20Distributors.pdf
EVOL LNG (2015), Power Generation. Accessed 22 September 2015,
http://www.evollng.com.au/power-generation
FMG (2014), Fortescue announces Natural Gas Transportation Agreement to lower costs at
Pilbara operations. Accessed 23 December 2014.
http://fmgl.com.au/media/1055/42m4lsg5w3w1zc761.pdf
Forbes (2014), Anadarko Signs Supply Contracts With Asian Buyers, Defining Clearer
Investment Plans For Mozambique LNG. Accessed 25 July 2015.
http://www.forbes.com/sites/greatspeculations/2014/03/31/anadarko-signs-supply-contractswith-asian-buyers-defining-clearer-investment-plans-for-mozambique-lng/
Page 98 of 105
Fuel Fix (2015), Nearing Sabine Pass start up, Cheniere reports loss in third quarter.
http://fuelfix.com/blog/2015/10/30/nearing-sabine-pass-startup-cheniere-reports-loss-in-thirdquarter/#27079101=0
Geoscience Australia (2014), Australian Energy Resources Assessment. Accessed
23 December 2014.
http://www.ga.gov.au/news-events/news/latest-news/release-of-updated-australian-energyresource-assessment
GIIGNL (2013), The LNG Industry 2013. Accessed 25 November 2015.
http://www.giignl.org/publications
Government of Western Australia (2014), State gets new domestic NWS gas commitment.
Accessed 31 August 2015.
https://www.mediastatements.wa.gov.au/Pages/Barnett/2014/11/State-gets-new-domesticNWS-gas-commitment.aspx
Hess (2014), Hess Announces LOI with the North West Shelf to Liquefy Equus Gas.
Accessed 23 December 2014.
http://phx.corporate-ir.net/phoenix.zhtml?c=101801&p=irol-newsArticle&ID=2001697
HFW (2013), Holman Fenwick Willan Singapore - the new player in the global LNG market.
http://www.hfw.com/Singapore-new-player-LNG-market-May-2013
IEA (2015a), World Energy Outlook. Accessed 25 November 2015.
http://www.worldenergyoutlook.org/
IEA (2015b), Gas Medium-Term Market Report 2015. Accessed 26 November 2015.
https://www.iea.org/Textbase/npsum/MTGMR2015SUM.pdf
IGU (2015a), World LNG report 2015 Edition. Accessed 25 November 2015.
http://www.igu.org/sites/default/files/node-page-field_file/IGU-World%20LNG%20Report2015%20Edition.pdf
IGU (2015b), Wholesale Gas Price Survey 2015 edition. Accessed 26 November 2015.
http://www.igu.org/sites/default/files/node-pagefield_file/IGU%20Whole%20Sale%20Gas%20Price%20Survey%20Report%20%202015%20
Edition.pdf
IMO (2013), Gas Statement of Opportunities, July 2013. Accessed 26 November 2015.
http://www.imowa.com.au/docs/default-source/publications-and-reporting/GSOO/gsoo_july2013.pdf?sfvrsn=0
Page 99 of 105
IMO (2014a), Gas Statement of Opportunities January 2014. Accessed 25 November 2015.
http://www.imowa.com.au/docs/default-source/publications-andreporting/GSOO/gsoo_january-2014.pdf?sfvrsn=0
IMO (2014b), Gas Statement of Opportunities December 2014. Accessed
25 November 2015.
http://www.imowa.com.au/docs/default-source/publications-and-reporting/GSOO/2014-gasstatement-of-opportunities.pdf?sfvrsn=0
IMO (2015), Electricity Statement of Opportunities June 2015. Accessed 26 November 2015.
http://www.imowa.com.au/docs/default-source/Reserve-Capacity/2014-electricity-statementof-opportunities76EBFFC3E047.pdf?sfvrsn=0
Innovative Energy Consulting (2012), Australia Domestic Gas Policy Report Prepared for
The DomGas Alliance, November 2012. Accessed 22 December 2014.
http://www.domgas.com.au/pdf/Media_releases/2012/Australia%20Domestic%20Gas%20Pol
icy%20Final%20Report.pdf
Macquarie Equity Research (2012), Global LNG Outlook, 10 September 2012.
McKinsey (2013), Extending the LNG boom: Improving Australian LNG productivity and
competitiveness, Oil & Gas and Capital Productivity Practices, May 2013. Accessed
18 December 2014.
http://www.mckinsey.com/global_locations/pacific/australia/en/latest_thinking/extending_the_
lng_boom
Minister for the Environment (2015), Media release - Certainty and growth for renewable
energy. Accessed 1 July 2015.
https://www.environment.gov.au/minister/hunt/2015/pubs/mr20150623.pdf
National Offshore Petroleum Titles Administrator (2015), Public release of data. Accessed
26 November 2015.
http://www.nopta.gov.au/data-mgmt/public-release.html
OCE (2015a), Australian Energy Statistics 2015, Accessed 7 September 2015.
http://www.industry.gov.au/Office-of-the-Chief-Economist/Publications/Pages/Australianenergy-statistics.aspx
OCE (2015b), Resource and Energy Quarterly September 2015. Accessed 26 November
2015.
http://www.industry.gov.au/Office-of-the-ChiefEconomist/Publications/Documents/req/Resource-and-Energy-Quarterly-September2015.pdf
OCE (2015c), Australian Energy Projections to 2049-50, Table 16. Accessed
4 September 2015.
http://www.industry.gov.au/Office-of-the-Chief-Economist/Publications/Documents/aep/aep2014-v2.pdf
Page 100 of 105
OCE (2015d), Westpac-Department of Industry, Innovation and Science China Resources

Quarterly. Accessed 25 November 2015.
http://www.industry.gov.au/Office-of-the-Chief-Economist/Publications/Pages/WestpacIndustry-Science-China-Resources-Quarterly.aspx
Oxford University (2014), The Future of Australian LNG Export Will domestic challenges
limit the development of future LNG export capacity? Accessed 10 November 2014.
http://www.oxfordenergy.org/2014/09/the-future-of-australian-lng-exports-will-domesticchallenges-limit-the-development-of-future-lng-export-capacity/
REMCo (2015), Monthly market outcomes report - September 2015. Accessed
29 September 2015.
http://www.remco.net.au/attachments/article/27/REMCo%20Monthly%20Market%20Outcom
es%20Report%20-%20September%202015.pdf
Reuters (2015a), FACTBOX-Outlook for Japan nuclear reactor restarts. Accessed
7 October 2015.
http://in.reuters.com/article/2015/08/31/japan-nuclear-restarts-idINL4N1103D620150831
Reuters (2015b), China launches new oil and gas trading platform - Xinhua. Accessed
26 November 2015.
http://uk.reuters.com/article/2015/07/01/china-commodities-exchangeidUKL3N0ZH3IT20150701
Russian Times (2015), China begins construction of Power of Siberia pipeline for gas
delivered from Russia. Accessed 26 November 2015.
https://www.rt.com/business/270352-russia-china-gas-pipeline/
SMH (2015), New floating LNG design for $US5b Santos Project. Accessed 26
November2015.
http://www.smh.com.au/business/new-floating-lng-design-for-us5b-santos-project-20150519gh4tjx.html
Tan, J (2015), Singapore: Friend or Foe to Australian LNG?, Energy News, Volume 33, No 2,
June 2015, p 13. Accessed 25 November 2015.
http://www.aie.org.au/AIE/Publications/Energy_News__Journal_/AIE/Publications/Energy_N
ews.aspx?hkey=8ce573c4-3896-4825-b85d-68196bef0be0
Thomson Reuters Zaywa (2014), Mozambique emerges as LNG front-runner, 13 April 2014.
https://www.zawya.com/story/Mozambique_emerges_as_LNG_frontrunnerZAWYA20140413070329/
Tokyo Electric Power Company (2014), Press Release (Sep 12,2014) Sale and Purchase
Agreement for LNG from BP Singapore-Introducing "Portfolio contract" for the first time in a
long term contract and lean LNG and Henry Hub link for price indexation. Accessed
2 September 2015.
http://www.tepco.co.jp/en/press/corp-com/release/2014/1241741_5892.html
Transerv Energy (2012), Alcoa confirms its commitment to Warro Gas Project, 5 November
2012, ASX Announcement. Accessed 26 November 2015.
http://www.asx.com.au/asxpdf/20121105/pdf/429zlpx5nlkf50.pdf
Page 101 of 105
Tusiani, Michael D and Shearer, Gordon (2007), LNG: A Nontechnical Guide, PennWell
Books.
WA Department of Treasury (2015), State Budget 2015-16. Accessed 30 August 2015.
http://www.ourstatebudget.wa.gov.au/
WA Minister for Energy Media Statement (2011), State Government announces key projects
to boost energy security. Accessed 25 November 2015.
https://www.mediastatements.wa.gov.au/Pages/Barnett/2011/05/State-Governmentannounces-key-projects-to-boost-energy-security.aspx
WA Parliament (2011), Inquiry into domestic gas prices. Accessed 25 November 2015.
http://www.parliament.wa.gov.au/publications/tabledpapers.nsf/displaypaper/3813232af0e09
6cabecf9c8e4825785e0004c326/$file/3232.pdf
WA Parliament (2015), Browse FLNG development domestic gas and supply chain key
principles agreement. Accessed 10 October 2015.
http://www.parliament.wa.gov.au/publications/tabledpapers.nsf/displaypaper/3913035accac0
3e7ea62770248257e6d00506880/$file/3035.pdf
The West Australian (2015), Alcoa nod for Pinjarra expansion. Accessed 20 October 2015.
https://au.news.yahoo.com/thewest/wa/a/29728626/alcoa-nod-for-pinjarra-expansion/
Whitehouse (2015), U.S.-China Joint Presidential Statement on Climate Change. Accessed
8 October 2015.
https://www.whitehouse.gov/the-press-office/2015/09/25/us-china-joint-presidentialstatement-climate-change
Woodside (2007), Transcript of the 36th Annual General Meeting, 19 April 2007, Accessed
26 November 2015.
http://www.asx.com.au/asxpdf/20070419/pdf/3120cf8ydxqb4r.pdf
Woodside (2010 to 2015), Quarterly reports. Accessed 26 November 2015.
http://www.woodside.com.au/Investors-Media/Pages/Webcasts-and-Teleconferences.aspx
Woodside (2012), 2011 Full Year Results Briefing, February 2012. Accessed 22 December
2014.
http://www.woodside.com.au/InvestorsMedia/Announcements/Documents/22.02.2012%202011%20Full%20Year%20Results%20Pr
esentation%20with%20Speaker%20Notes.pdf
Woodside (2015), Feed phase entered for Browse FLNG development. Accessed
25 November 2015.
http://www.woodside.com.au/InvestorsMedia/announcements/Documents/1.07.2015%20Feed%20Phase%20Entered%20for%20Br
owse%20FLNG%20Development.pdf
Page 102 of 105
Page 103 of 105

Gas Statement of Opportunities - Western Australia

Încărcat de

Informații document

Drepturi de autor

Formate disponibile

Partajați acest document

Partajați sau inserați document

Opțiuni de partajare

Vi se pare util acest document?

Este necorespunzător acest conținut?

Drepturi de autor:

Formate disponibile

Gas Statement of Opportunities - Western Australia

Încărcat de

Drepturi de autor:

Formate disponibile

entering into or altering a new or existing agreement;

Independent Market Operator

Gas referred to throughout this report refers to natural gas.

Gas Statement of Opportunities November 2015

The domestic gas market remains in excess supply

Expected gas demand range

High case potential gas supply forecast

Base case potential gas supply forecast

Total production capacity

NIEIR and IMO forecasts, 2015

Gas Statement of Opportunities November 2015

IMO forecasts 2016 to 2025

Domestic gas demand is forecast to grow very slowly

NIEIR forecasts 2016 to 2025

operation of the South Hedland Power Station;

Gas Statement of Opportunities November 2015

operation of the Pilbara Temporary Power Station; and

expansion of the Sino Iron magnetite mine.

NIEIR forecasts 2016 to 2025

Gas Statement of Opportunities November 2015

The domestic gas market will benefit from greater transparency

Gas Statement of Opportunities November 2015

Gas resources and reserves

Years remaining beyond 2025

Geoscience Australia (2014), gas basins in Australia (offshore and onshore).

Gas Statement of Opportunities November 2015

Gas transmission capacity

APA Group (2014).

Gas Statement of Opportunities November 2015

forecast WA economic growth;

resources sector outlook;

domestic gas prices;

WA electricity consumption; and

production efficiency assumptions (in the resources sector).

Gas Statement of Opportunities November 2015

Introduction and acknowledgements ...................................................................................... 11

WA gas market overview and infrastructure .......................................................................... 13

Gas demand forecast methodology ............................................................................. 38

Overview of domestic gas demand.............................................................................. 13

Forecast methodology and assumptions ............................................................................... 38

Structure of this report ................................................................................................. 11

Domestic demand forecast .......................................................................................... 58

Gas reserves and resources .................................................................................................... 69

Gas resources in WA ................................................................................................... 69

Gas Statement of Opportunities November 2015

Remaining resources and reserves ............................................................................. 76

Other issues ............................................................................................................................... 78

WA Government Electricity Market Review ................................................................. 78

Appendix A. Abbreviations ................................................................................................................ 84

Gas Statement of Opportunities November 2015

Gas Statement of Opportunities November 2015

Introduction and acknowledgements

Structure of this report

The structure of the report is as follows:

chapter 5 provides an overview of key hydrocarbon basins in WA and an estimate of

Alcoa of Australia (Alcoa);

Australian Petroleum Production and Exploration Association (APPEA);

Gas Statement of Opportunities November 2015

DBNGP (WA) Transmission Pty Ltd (DBNGP Transmission);

Department of Mines and Petroleum (DMP);

Department of State Development (DSD);

Japan Australia LNG (MIMI);

North West Shelf Joint Venture (NWS JV);